Sat, Nov 24, 2018 - Page 11 News List

Hon Hai vows not to cut R&D funds

Staff writer, with CNA

Hon Hai Precision Industry Co (鴻海), the world’s largest contract electronics manufacturer, is committed to increasing its spending on research and development (R&D) of new technologies.

Responding to a Bloomberg report about plans to substantially reduce costs next year amid falling global demand, Hon Hai said it is reviewing its spending for next year, but would not cut back on R&D funding.

“Hon Hai is building on its efforts over the past 40 years to develop core manufacturing technology and is exploring the field of industrial Internet at the moment,” the company said in a statement late on Thursday.

It said its long-term efforts in industrial Internet development, big data, artificial intelligence and production automation have paid off for the group.

Hon Hai, known as Foxconn Technology Group (富士康) overseas, said it would “boost R&D spending in a bid to develop new technology and innovative products.”

The funding is to be allocated based on the group’s worldwide investments and specific needs at certain production sites as part of a global expansion effort, said Hon Hai, which assembles iPhones for Apple Inc.

In the statement, Hon Hai said it is working to transform its operations, which includes its normal annual review of its spending plans and allocation of resources.

The cost review is focused mainly on divisions and subsidiaries that have not been meeting their operational and profit targets, the company said, adding that its R&D operations are not part of that review.

According to the Bloomberg report, Hon Hai is planning to cut costs by 20 billion yuan (US$2.88 billion) next year to almost half of its current annual spending, due to expected stiff competition.

The report said Hon Hai is aiming to reduce spending on its iPhone assembly operations by 6 billion yuan and cut its non-technical workforce by 10 percent.

A European brokerage has cut its target price on Hon Hai shares, citing Apple’s plans to reduce orders to the Taiwanese supplier amid weaker-than-expected demand for its three latest iPhones.

In a research note yesterday, the brokerage said its decision to cut its target price on Hon Hai also reflected expected continued losses by FIH Mobile Ltd (富智康), which is about 70 percent-owned by Hon Hai.

Amid such unfavorable circumstances, the brokerage said it has lowered its target price on Hon Hai shares from NT$80 to NT$76, but kept its “neutral” recommendation on the stock.

Hon Hai shares yesterday rose 0.72 percent to close at NT$70 in Taipei trading.

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