Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康), yesterday started a three-day event to celebrate 30 years of doing business in China.
However, with its stock down almost 20 percent since late last year, the nation’s second-most valuable company with a market value of US$51 billion is under pressure to show that it can convert new initiatives into growth.
The Sharp Corp purchase in 2016 and a handful of more recent deals — including an agreement announced on Tuesday for Sharp to buy Toshiba Corp’s PC business for US$36 million — indicate that a push into producing its own branded products is one part of the strategy.
Photo: Kelvin Chan/AP
However, just as important is a complicated plan to provide “integrated solutions” for businesses that include sophisticated hardware and software services, such as cloud computing, Louis Woo (胡國輝), special assistant to Hon Hai chairman Terry Gou (郭台銘), said in an interview.
Woo called it a “new business model” that could be especially appealing to smaller companies and institutions such as hospitals, which have sophisticated technical requirements that they often have trouble handling on their own.
“We have built data centers for many of our customers, but we’re not known to provide data center services,” Woo said. “In the future, since we’re having all these pieces, we can put them together to provide a technical service to a business customer.”
The firm is also betting that it can package its traditional expertise to sell smart manufacturing services, included fully automated factories, to other industrial companies.
Woo added that none of this would happen overnight — a view shared by skeptical analysts.
“Right now, with the contract manufacturing, it’s very hard to switch to a new model,” Yuanta Securities Investment Consulting Co (元大投顧) analyst Vincent Chen (陳豊丰) said.
It also has to be careful to keep current customers onside, in particular Apple Inc, which is estimated to still generate about half of Hon Hai’s total revenue.
“There will definitely be risks” in pursuing so many different areas, Trendforce Corp (集邦科技) analyst Boyce Fan (范博毓) said. “But this will be key for Foxconn to find the next growth opportunity.”
Hon Hai’s technical strengths are in Sharp’s high-resolution imaging and displays, which use the next-generation 8K standard and have ready applications for medical imaging devices such as endoscopes.
Gou has also touted the possibility of smart toilets that could double as health diagnostic devices, with sensors feeding data to the cloud for analysis, Woo said.
That would play to Foxconn’s strength in 5G wireless communications equipment.
Such efforts would not come cheap, and the company is laying the financial and political groundwork for its next chapter with a Shanghai initial public offering (IPO) for one of its main subsidiaries, Foxconn Industrial Internet Co (FII, 富士康互聯網).
The US$4.3 billion IPO would provide funding for initiatives in smart manufacturing, cloud computing, data centers and 5G technology.
FII generates a big chunk of revenue from making comparatively mundane components, such as smartphone casings and frames, and for all the talk of healthcare and cloud and artificial intelligence, most of the IPO proceeds are earmarked for smart manufacturing.
Meanwhile, the parent company has huge capital needs for the core display business, with new plants in China and the US expected to cost US$20 billion between them.
It is still unclear how hard Hon Hai will push its products in the mainstream consumer electronics business, a hyper-competitive arena where sophisticated marketing is crucial.
Hon Hai could do more deals to acquire established brands, Fan said.
“It will use whatever branding there is already” rather than try to build a Foxconn brand, he said.
The company earlier this year added to its brand portfolio with the acquisition of Belkin International Inc, a well-known US maker of computer accessories.
Chinese smartphone juggernaut Xiaomi Corp (小米) could be a model for Hon Hai to emulate, Chen said, adding that Xiaomi is not only selling its phones and other products, but also has a range of services to go with them, offered through their own stores.
Woo expressed caution, saying: “We’re still looking at how to go about doing that without any direct conflict with our customers.”
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to