Hon Hai Precision Industry Co Ltd (鴻海精密), which makes iPhones and iPads for Apple Inc, yesterday said it was aiming for at least 15 percent revenue growth next year, thanks to rising demand for its electronics in emerging markets like China.
In addition, Hon Hai’s relocation of plants to the Chinese hinterland from coastal areas, where labor wages are on the rise, would also helped boost growth, Hon Hai chairman Terry Gou (郭台銘) told reporters on the sidelines of a groundbreaking ceremony for the company’s NT$1.9 billion (US$631 million) cloud technology research and development center in Greater Kaohsiung.
“We’ve made good progress in relocating [factories] to central and western provinces of China as well as in adjusting production lines,” Gou said.
The relocation began in October last year.
On the demand side, Gou said the Chinese central bank’s latest announcement that it would easing monetary measures would further stimulate domestic demand in China, which would be a vital factor fueling the Chinese economy’s growth next year.
On Wednesday, the People’s Bank of China announced a cut of 50 basis points in banks’ reserve requirement ratios.
“China is one of very few countries in the world that still enjoys robust growth from its domestic market,” Gou said, adding that emerging markets such as Brazil were also bright spots amid global gloomy economic prospects.
Hon Hai is the flagship company of Hon Hai Technology Group (鴻海科技集團).
Although the “global economy could shrink next year, the [Hon Hai Technology] group will certainly grow,” based on the company’s major investments in China and Brazil, Gou said. “Our internal target is to grow [revenue by] 15 percent [year-on-year] at least.”
JPMorgan expects Hon Hai to expand its revenue by 14 percent annually to NT$3.42 trillion this year and to increase 8.5 percent next year to NT$3.71 trillion on a consolidated basis.
JPMorgan rated Hon Hai overweight with target price at NT$105, implying a 26.81 percent upside from yesterday’s closing price of NT$82.8 on the TAIEX.
Gou said he was confident that demand for electronics would hold up, as seen by the strong sales during the Thanksgiving holiday in US.
“There will be no layoffs at the group next year. Instead, we will still be hiring,” Gou said. The group employs 1.2 million people around the world, he added.
Over the next five years, Hon Hai plans to increase the number of software engineers at its Kaohsiung cloud technology research and development center from 300 to 3,000, Gou said. The company was looking at providing high value-added cloud technology services, such as long-distant medical care, he said.
The company’s Kaohsiung software team, which was formed three years ago, has already created 300 software-related patents, Gou said.
Gou also called for political stability, saying that President Ma Ying-jeou’s (馬英九) reelection would help local companies as they start to draw up business strategies to weather the global economic slump, which was likely to be more acute than previous downturns.
“What we want is not an all-powerful government ... [Political] Stability is the most important thing for us,” Gou said.