Driven by the fast growth of Apple Inc, Hon Hai Precision Industry Co (鴻海精密) looks set to account for more than of all revenue in the global electronics manufacturing services (EMS) industry by next year, up from 44.2 percent last year, researcher iSuppli Corp said.
“Foxconn’s customers are some of the hottest companies in the electronics business today, most notably Apple Inc,” iSuppli associate Thomas Dinges said in a report on Tuesday. “As Apple and others have gained share, so has Foxconn.”
Foxconn is Hon Hai’s trade name.
EMS providers are defined as companies whose primary business is the contract manufacturing of electronic products on behalf of original equipment makers.
According to iSuppli, Hon Hai was the dominant EMS provider in the first quarter, with revenues of US$17.1 billion, dwarfing No. 2 player Flextronics International Ltd, with US$5.9 billion.
Hon Hai outperformed the 27.5 percent year-on-year revenue increase recorded by the top 10 EMS providers in the first quarter, reflecting the strength of its customer base, the report said.
“Apple represents the fastest-growing customer for Foxconn, which manufactures products including the iPad and iPhone 4,” the report said.
Apple had issued increased production targets for the iPad to its Asian suppliers, said iSuppli, predicting that the company will ship 12.9 million iPads this year, an amount that will nearly triple to reach 36.5 million next year.
Global shipments of iPhones are also expected to rise to 53.5 million next year, more than double the 25.1 million shipped last year, iSuppli said.
JPMorgan said yesterday that Hon Hai appears not to have been hurt by recent slowing demand for consumer notebook computers and stagnating demand for netbook computers.
Instead, Hon Hai “should benefit largely from the ongoing strength in commercial segments [server, desktops, printers] and emergence of the iPad as a netbook alternative,” JPMorgan analyst Gokul Hariharan and his colleagues wrote in a client note.
“As a result, we expect Hon Hai to continue to outgrow notebook ODM vendors in the next 18 months,” he wrote.
The US brokerage estimated that Apple’s contribution to Hon Hai would account for 24 percent of the Taiwanese firm’s annual revenue this year and 27 percent next year, mainly helped by the iPad and iPhone.
“While the market is concerned about some diversification away from Hon Hai by Acer Inc (宏碁) and smaller customers, we feel that Hon Hai’s focus clients should still grow at a considerable pace, supporting strong top-line growth in 2010 and 2011,” JPMorgan analysts said in the note.
Hon Hai also makes LCD TVs for Sony Corp as well as notebooks and printers for Hewlett-Packard Co, in addition to other major brands.
Its shares closed unchanged at NT$131 yesterday in Taipei trading.
JPMorgan raised its target price for Hon Hai shares to NT$160 from NT$148 to reflect the Taiwanese company’s stronger earnings momentum and improving margin trends for next year.
Despite the potential risks of Hon Hai’s decision to relocate plants to China’s inland provinces, JPMorgan said the company is making the move faster than expected and that should reduce the impact of wage hikes on its earnings outlook.
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