Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics maker, is considering spinning off its connector manufacturing business into a separate entity, market sources said yesterday.
The sources said Hon Hai’s management are likely to disclose more information about the planned spin-off of the Network Interconnection Business Group (NWING) at its annual general meeting scheduled for June 26.
Foreign news services have recently reported that Hon Hai will spin off the unit, which accounted for about 2.5 percent of the group’s NT$3.91 trillion (US$130 billion) in consolidated sales last year.
The report said NWING, one of the 13 business units under Hon Hai’s umbrella, is struggling because of weakening demand in the global personal computer industry.
Local media said that Hon Hai, which assembles iPads and iPhones for Apple Inc, is also likely to separate its Internet communications production business and its computer, consumer electronics and communications product distribution unit from the parent company.
In response to the media reports, Hon Hai said the company puts a high priority on restructuring its organization to make its operations more efficient and to strengthen its bottom line.
It added it would make announcements about any reorganization of its business at the appropriate time.
Market sources said Hon Hai intends to spin off some of its units to transform the manufacturing giant into a holding company, which would give it greater flexibility once it is ready to extend its reach beyond manufacturing.
The sources said that after the reorganization, Hon Hai would serve as the “brain” of the group and specialize in research and development and patent development and acquisition.
In a report to its shareholders released last week, Hon Hai said this year is crucial for the company as it attempts to diversify its business and get more heavily involved in software development.
Hon Hai was upbeat about its plans to enter the software business and said that the integration of software and hardware development would create more benefits for customers.
Some critics remained skeptical about Hon Hai’s spin-off plans, contending that the reorganization would hurt the company’s production capabilities and increase its operating costs.
However, the sources said that Hon Hai is determined to maintain its “one-stop” services in contract manufacturing by setting up a centralized technology development committee that is expected to further improve the company’s service to customers.