Foxconn Technology Group (富士康科技集團), one of Apple Inc’s major suppliers, is likely to expand its production capacity in China to manufacture more products for the US consumer electronics giant, an analyst said yesterday.
With such expansion, the group would ride the wave of Apple sales this year, Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said in response to a media report that Foxconn was mulling expanding in China.
According to China’s Xinhua news agency, Apple CEO Tim Cook met with Foxconn chairman Terry Gou (郭台銘) to discuss the possibility of expanding Foxconn’s production base in China.
Foxconn, known as Hon Hai Group (鴻海集團) in Taiwan, employs about 1 million workers at four production locations in China, producing Apple’s popular iPhone and iPad.
“I think an expansion of Foxconn’s production is very likely since Apple is gearing up to launch new devices on the global market,” Hsu said.
“Apple tends to lay down a long-term development plan and it is understood that it wants its suppliers to follow,” Hsu said.
Apple is widely expected to unveil its iPad 3 in the first quarter of this year and its shipments this year have been forecast to soar to 70 million units.
Meanwhile, its iPhone 5 is likely to be launched later this year.
Hon Hai Precision Industry Co (鴻海精密), which is listed on the Taiwan Stock Exchange, is the flagship company of Foxconn.
Hsu estimated that Apple accounted for about 40 percent of Hon Hai Precision’s consolidated sales in the fourth quarter of last year, driven particularly by the launch of the iPhone 4S in October. Sales of the iPhone 4S reached 37 million units in the fourth quarter, beating all market expectations.
“With a major customer like Apple, expansion will pave the way for Hon Hai Precision’s growth,” Hsu said. “Many investors are happy with Hon Hai Precision’s stable sales generated from its work for Apple.”
Hsu said Hon Hai Precision is expected to see an improving gross margin and falling operating costs this year after it relocates its production lines inland from Shenzhen, on China’s southeastern coast.
Hon Hai Precision’s earnings per share could rise to between NT$9.50 and NT$10 this year from an estimated NT$7.10 to NT$7.20 last year, he forecast.
In the first nine months of last year, the company generated NT$4.37 net profit per share.