Foxconn International Holdings Ltd (富士康控股), the world's biggest contract maker of handsets such as the Razr, joined Hong Kong's benchmark index yesterday after its market value rose six-fold, surpassing companies including Lenovo Group Ltd (聯想).
The market value of Shenzhen, China-based Foxconn surged to HK$160 billion (US$20.6 billion) from HK$26.5 billion in its Hong Kong Stock Exchange debut on Feb. 3 last year. The value of Lenovo, which has been removed from the index, rose 57 percent to HK$24.7 billion in the same period.
Foxconn became the key supplier for Nokia Oyj and Motorola Inc as the world's two biggest cellphone makers stepped up production in Asia to cut costs and be closer to growing markets.
Lenovo, the world's third-biggest personal-computer seller, is struggling to raise its profit as rivalry with Dell Inc and Hewlett-Packard Co intensifies in China, its No. 1 market.
"Handsets are at a place where PCs were in the mid-1990s," said Manish Nigam, a technology research analyst at Credit Suisse. "When the first wave of outsourcing started, the Asian manufacturers saw significant growth."
In addition to Raleigh, North Carolina-based Lenovo, Johnson Electric Holdings Ltd, the world's second-largest maker of miniature electric motors, has been removed from the index. China Construction Bank Corp (中國建設銀行) and Hong Kong Exchanges and Clearing Ltd have been included.
Foxconn shares declined 4.1 percent to HK$22.10 at the 4pm close of the Hong Kong market. Lenovo's stock slipped 2.2 percent to HK$2.72. Shares of Foxconn have gained 75 percent this year, compared with a 24 percent decline for Lenovo and a 14 percent rise in the Hang Seng Index.
Foxconn "will obtain more than 50 percent of Nokia/Motorola's outsourcing pie by end of FY07," Kevin Chang (張凱偉), a Taipei-based analyst at JPMorgan Securities Ltd, wrote in a report dated Sept. 6.
Revenue at Foxconn, a unit of Hon Hai Precision Industry Co (
Foxconn's sales soared more than 800 times in the past four years, to US$6.36 billion last year from US$7.6 million in 2001.
The company's net income doubled to US$302 million for the six months ended June 30, from US$146.9 million a year earlier.
Profit at Lenovo, which bought IBM Corp's personal-computer unit last year, fell 89 percent to US$5 million in the fiscal first quarter ended June 30 on costs of integrating the IBM business.
"The key growth period has passed for Lenovo," Kao said.
Lenovo's net income margin, or the percentage of profit from total sales, slipped to 0.15 percent for the quarter ending June 30, from 5.13 percent in the same period in 2004, before the IBM purchase.
Foxconn's margin remained steady at 6.89 percent for the six months ended June 30 this year, from 6.86 percent in the same half year in 2004.
China, the world's biggest cellphone market by users, added 38.4 million subscribers in the first seven months of this year, greater than the population of Canada, government data showed.
The government hasn't given a timeframe for issuing licenses for so-called third-generation (3G) services, which allow faster music and movie downloads to mobile phones.