Hon Hai Precision Industry Co (鴻海精密), the biggest assembler of Apple Inc’s iPhones, yesterday said it has launched an internal investigation following reports of fraud at its plant in Zhengzhou, China.
Hon Hai, known internationally as Foxconn Technology Group (富士康科技集團), said in a statement that, based on company policy, it would not comment on market rumors about its clients or products.
The company has begun assessing its standard operating procedures while authorities investigate the matter, Hon Hai said, adding that it would not indulge employees implicated in such acts.
The statement came after the Chinese-language online Mirror Media reported on Tuesday that top managers at Hon Hai have been involved in misappropriating assets since at least 2016, by selling defective iPhone casings, originally meant for destruction, under the table.
Citing an anonymous Taiwanese vendor who played the role of middleman, the report said the casings were mended and resold to wholesalers, who would then distribute them to Chinese and Taiwanese retailers.
The vendor was quoted as saying that some iPhone components from the Zhengzhou plant were rendered defective on purpose so that they could be distributed on the black market.
With an 80 percent gross margin for such transactions, a total of about NT$1.3 billion (US$43 million) in profits were made, the report said.
Apple is purportedly aware of the matter as the vendor e-mailed its chief executive officer, Tim Cook, about the situation six months ago, after having a fallout with a Hon Hai manager surnamed Wu (吳), the report said.
The vendor had also told Hon Hai executives of the matter, but to no avail, it said.
According to an e-mailed response from Apple to the vendor, the US-based firm has launched an investigation through its business assurance and audit team in the Asia region, the report said.
However, Apple has yet to follow up on the matter and has to date failed to reply to the vendor’s demand for compensation for reporting the matter, it said.
Hon Hai founder and former chairman Terry Gou (郭台銘) yesterday said that he was oblivious to the situation, as he has left the company, the Chinese-language Liberty Times (the Taipei Times’ sister newspaper) reported.
Hon Hai executives should shoulder the responsibility, Gou said.
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