Monday, July 11, 2005
Hon Hai Precision Industry Co. announced that the company is planning to set up a handset-component factory in a city in northern China to better supply its clients in the area. The total US$19.8 million fund allotted for this mobile-phone assembly factory in the Chinese port city of Tianjin through a unit of its handset affiliate Foxconn International Holdings Inc. traded in Hong Kong.
Some speculation swirled that Hon Hai's latest move only served as a sign for bigger plans to buy client Motorola Inc's handset plant in Tianjin with the goal of clinching a deal to make low-end handsets for the world's No.2 mobile phone brand. Hon Hai used a similar strategy in 2003 to buy Motorola Inc's Mexican handset factory. However, Hon Hai stressed the facility is designed to serve local customers in the mainland. Strengthening the component supply chain to save costs is a further step by Hon Hai to undercut rivals, which was crucial to promote orders for less expensive models.
The recent Hon Hai's move has put many Taiwanese industry insiders that it will cause serious threat to Taiwan's suppliers. OEM/ODM contract orders will eventually cut or stop if thing go their ways. The Motorola factory has outsourced as much as US$11.2 billion worth of products from local suppliers in each of the past few years.
This year, Hon Hai bought a local handset company, Chi Mei Communication Systems Inc. in May to boost its phone-design capabilities. Beside, Hon Hai also announced a plan to open a US$5.16 million factory in Kunshan, China through affiliate Foxconn (Far East) Ltd. of Hong Kong to make computer connectors.
By: DocMemory
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