Hon Hai could see profits increase if Apple fees rise

TALKS PLANNED::Firms involved in Apple’s supply chain could see revenues rise if they are successful in getting the US tech giant to increase the fees it pays

Staff writer, with CNA

Sat, Oct 20, 2012 - Page 14

Hon Hai Precision Industry Co (鴻海), which assembles iPhones and iPads for Apple Inc, declined to comment yesterday on local media reports that the company would hold talks with the US consumer electronics giant on raising its contracting fees.

Local media had cited unnamed executives from Hon Hai as saying the company and other firms in the Apple supply chain would start negotiations shortly with the US company to seek an increase in the fees they are paid to assemble and manufacture Apple products.

The executives cited said that the fees paid to contractors are set to the rise and that Apple was fully aware of its supply partners’ needs to receive a reasonable reward as they seek to improve the working conditions of their employees.

However, publicly Hon Hai, which employs about 1 million workers in China to produce electronics products for Apple, said the company would not comment on any specific client.

The media reports had said that Hon Hai and other firms in the Apple supply chain are targeting a 5 percent to 10 percent increase in the fees they receive from Apple.

If Hon Hai were to get a 5 percent fee increase, it would add NT$15 billion to the company’s sales in the fourth quarter of this year, the reports estimated.

Market analysts said Hon Hai has secured orders from Apple to assemble the iPhone 5, the newest version of the US firm’s popular smartphone launched last month, and the smaller version of the company’s tablet computer — the iPad mini — which commentators predicts is likely to be unveiled later this month.

Income from Apple is expected to account for about 40 percent of Hon Hai’s total revenues this year, with the iPhone and iPod representing 25 percent of its sales, and the iPad and Macbook computers accounting for another 15 percent, analysts said.

Separately, an estimated 205 Chinese workers at Hon Hai, which is known as Foxconn Technology Group (富士康科技集團) in China, are to participate in a corporate motivational tour of Taiwan next week, the company said.

The company plans to take the Chinese workers to Greater Kaohsiung and then to other parts of the country, Hon Hai said.

Hon Hai chairman Terry Gou (郭台銘) is expected to join the event on Friday next week at the group’s Dingpu (頂埔) plant in New Taipei City’s (新北市) Tucheng District (土城), and sources said he could comment on the progress of the company’s tie-up with Japanese LCD and television maker Sharp Corp, which hit a snag earlier this year.

Gou is also expected to comment on the group’s foray into the 60-inch LCD TV sector during the event in New Taipei City, sources said.