Shares of Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics maker, rallied yesterday on news that the company is planning an automated production project that would likely help it cut costs, dealers said.
Hon Hai rose 3.82 percent to close at NT$78.80, while the benchmark TAIEX was up 0.28 percent at 7,491.21.
The Central Taiwan Science Park said Hon Hai would invest NT$6.7 billion (US$223 million) through its subsidiary Foxnum Co (賜福科技) in the park’s Taichung zone to develop and produce automation -equipment, including the manufacturing of robots, in support of its contract manufacturing businesses.
Foxnum, established by Hon Hai in 2007, specializes in the production of computer numerical control machine centers and sophisticated machine tools.
Work on the first stage of the automation project is scheduled to begin on Saturday, the park said. It estimated that the annual production value of the project would reach NT$120 billion over three to five years.
“Cutting production costs have become the priority for Hon Hai in an effort to maintain its gross margin and boost its bottom line,” Value Partners Concord Asset Management Co (惠理康和投信) analyst Henry Chen (陳志恆) said.
Hon Hai, which produces iPhones and iPads for Apple Inc, has continued to face pressure from rising wages in China, where it has about 1 million employees. The company’s profitability in the second quarter was also eroded by relocation costs, Chen said.
During the April-to-June period, Hon Hai’s net profit fell 9.8 percent from the previous quarter to NT$12.98 billion, or earnings per share of NT$1.09.
Chen said he expected Hon Hai to report earnings per share of no less than NT$1.3 for the third quarter as the company benefits from a weakening NT dollar and falling raw material prices.
Barclays Capital is among several foreign brokerages that remain upbeat about Hon Hai’s earnings outlook in the fourth quarter, saying the firm would be boosted by strong demand for iPhones and iPads.
Barclays said shipments of iPhones in the fourth quarter were expected to range between 33 million and 37 million units, while shipments of iPads were likely to range between 14 million and 19 million units.
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