Hon Hai to raise its stake in panel maker InnoLux

Hon Hai Precision Industrial Co (鴻海精密), one of the world's top electronics manufacturing services companies, yesterday decided to raise its investment in panel maker InnoLux Display Corp (群創光電).

"The [panel] industry is essential to Hon Hai as our products -- like handsets, DVD and broadband networking systems -- all need this key component," Hon Hai's founder and chairman Terry Gou (郭台銘) told shareholders at an annual general meeting in Tucheng, Taipei County, yesterday.

The industry is expected to grow in the long run and is suitable for long-term investment, Gou said.

Hon Hai's shareholders agreed unanimously to raise the company's investment in the small panel ma-ker InnoLux from 6 percent to as much as 33 percent.

InnoLux, established in January last year, is scheduled to start production this November.

Its 4.5-generation fab will ship 23,000 1.8-inch panels for handsets and 7-inch panels for car products every month.

A fifth-generation fab will produce 65,000 15-inch and 17-inch panels for monitors each month.

InnoLux is expected to supply half of Hon Hai's demand for panels, Gou said.

Last year, Hon Hai saw its net profit grow 35 percent to NT$22.82 billion, or NT$8.93 per share, on consolidated revenue of NT$327.79 billion, up from NT$245.09 billion in 2002. The company will issue a NT$2 cash dividend and NT$1.5 in stock dividends.

The company posted NT$28.01 billion in sales last month, up 51.56 percent from a year ago. For the first five months, its revenue amounted to NT$135.56 billion.

Foreign investors expected the company's revenue to hit NT$490 billion this year, driven by growth in handset contract manufacturing for clients including Motorola and Nokia Ojy. It will also benefit from growth in the broadband networking business after it acquired Ambit Microsystems Corp (國電), which produces parts for telecommunications equipment.

Hon Hai's shareholders also approved a plan to sell as many as 300 million new shares overseas for future expansion. The company is also considering listing its wholly-owned overseas investment company, Foxconn International Holdings Ltd, in Hong Kong, Singapore or Tokyo, Gou said.

The Foxconn unit generated NT$50 billion in revenues last year, and Hong Kong is being considered due to its robust capital market and its proximity to Taiwan, Gou said.

Gou yesterday remained tight-lipped about the company's plans to break into notebook manufacturing, saying only that the company saw decent margins from making notebook components and did not necessarily want to assemble them.

Hon Hai earlier this year bought a stake in small local notebook- computer company Chi Ho Computer Inc (志合電腦) in preparation for entering the market, said Molly Lin (林美如), an analyst at Polaris Securities Group (寶來證券).

The company may start assembling laptops next year at the soonest, Lin said, and the move could intensify the already crowded industry and result in fierce competition.

Hon Hai's shares dropped 4.3 percent to close at NT$133.50 on the TAIEX yesterday.