Hon Hai eyes patents, e-commerce in diversification drive

Reuters News
Posted: Jun 26, 2013 8:13 AM

By Clare Jim

TAIPEI (Reuters) - Hon Hai Precision Industry Co Ltd, looking to reduce its reliance on making products for Apple Inc, said on Wednesday it would focus on developing new technologies, intellectual property rights and e-commerce.

Hon Hai, the world's biggest electronics contract manufacturer, earned more than $100 billion in revenue last year - with Apple estimated to account for up to 60 percent.

As Apple's growth slows in the face of fierce competition from Samsung Electronics Co Ltd, Hon Hai has been keen to diversify into higher-margin businesses, but its slew of initiatives has opened it up to criticism that it lacks focus.

To help it develop those businesses it is planning to hire between 5,000 and 10,000 engineers across Taiwan, adding to the 6,000 currently on the island, Chairman Terry Gou told the company's annual shareholder meeting.

Focal points will be research and development, software and patent rights, he said, adding that Hon Hai ranks No.8 globally among companies in terms of the amount of patents it holds.

On the e-commerce front, it is planning to shift its China retailing focus to online sales, after a joint venture with German retailer Metro AG in China failed because of fierce competition.

Gou's speech came at a time when sales are comparatively weak, down 12.6 percent for the year through to end-May against the same period last year.

He said the company's target of achieving 15 percent revenue growth this year was challenging because of slowing global growth and changes in consumer tastes in electronics products. But he said he expected revenue and earnings per share to beat last year's record highs.

However analysts are mostly forecasting flat profits. "Hon Hai's earnings momentum in the first half seems soft, due to lack of new product launches by Apple," said Rex Chen, chief investment officer of BNP Paribas' asset management joint venture in Taiwan.

Hon Hai also hopes to drive revenue growth with plans to split off its connector business into a separate unit as a prelude to a public share offer (IPO) three years later, Gou said. Making it an independent company would help increase the unit's sales by 20 percent in the first year, he said.

The company has more than 20 other business divisions which could be split off into separate units, he added.

Hon Hai, the flagship firm of the Foxconn Technology Group, also plans large investments in Indonesia, where it hopes to sign an agreement soon on making and selling cellphones for local brands, and it will also expand further in the United States at some point, he said.

(Additional reporting by Faith Hung; Writing by Edwina Gibbs; Editing by Pravin Char)