Hon Hai to accelerate company transformation in 2014

CNA
February 16, 2014, 12:00 am TWN

TAIPEI–Hon Hai Precision Industry Co., the world’s largest contract electronics maker, will accelerate its efforts in transforming its business in the first half of this year as it strives to diversify from being simply a hardware manufacturer, market analysts said Saturday.

They said the year 2014 will be critical for Hon Hai to extend its reach to software development through its new business model: integration, innovation, design and manufacture (IIDM), which is expected to help the company upgrade itself in a bid to provide clients with value-added services and boost its earnings.

The change in strategy comes as the costs of production has risen in Hon Hai’s key manufacturing base of China, where wages have risen significantly. Also, the company can longer grow just on making products for major technology brands, as its clients constantly want lower costs.

In addition to transforming its business, Hon Hai has mapped out a blue print to boost its international visibility by making more investments globally, including a deal the company signed last week to pour US$1 billion investment into Indonesia, and a plan to raise its investments in the U.S., analysts added.

Currently, Hon Hai assembles iPhone and iPad for Apple Inc., which accounts for more than 40 percent of the Taiwanese company’s total sales, while churning out gadgets for other international brands, such as Dell, Sony and Hewlett-Packard.

Hon Hai Chairman Terry Gou said his company will take advantage of the manufacturing clout it has built in the past four decades to enter a new stage to take on fiercer-than-ever competition in the global market over the next 10 years.

Gou believes that in order for Hon Hai to have a successful business transformation from manufacturing, it has to devote itself to developing cloud technology and step into production automation and logistics control, while it aims to take a share in electronics commerce.

In fact, Hon Hai has been doing so and is expected to do more this year to achieve this goal, analysts said.

In terms of cloud, Hon Hai has been investing in the Kaohsiung Software Technology Park to set up a cloud technology development center, while the company has started developing robots for its production lines, aiming to boost efficiency and cope with rising labor costs.

The company has reorganized itself into 12 sub-groups and plans to spin off these sub-groups for future growth, while the headquarters in Taipei will take charge of finances and patent development.

In terms of e-commerce, Hon Hai is scheduled to launch a business-to-business (B2B) trading platform, called B2B Foxconn.com, in early March to become a venue for selling semi-finished electronics products in the initial stage with an aim of becoming a commerce-oriented company.

Meanwhile, the company has launched internal exhibitions to showcase a wide range of technology, such as 4G wireless communications, electric cars, 4K ultra-high definition TVs, massive data computing and optoelectronics. It hopes these exhibitions will encourage its staff to carry out more technology innovation.

After signing a letter of intent last week in investments in Indonesia, Hon Hai is planning to map out the details of the investment deal in April or May. It’s aimed at tapping a growing appetite for consumer electronics devices in the populous Southeast Asian market.

In addition, Hon Hai is expected to complete a US$40 million investment plan in the U.S. in two years as part of its efforts to go global.

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