Hon Hai Precision Industry Co (
Despite the pressure of slowing demand for computer gear during the second quarter and lower profit margins, Hon Hai reported that its net income rose 78 percent year on year to NT$4.1 billion (US$120 million) and sales rocketed 90 percent to NT$57.6 billion (US$1.68 billion).
"The bottom line slightly exceeded my estimation," said William Fong (
The company is on track to break through the NT$200 billion revenue barrier, a goal it set earlier in the year. For the first six months of this year, Hon Hai's revenue surpassed NT$100 billion (NT$2.9 billion) and the lucrative half of the year is yet to come. Back to school and holiday sales in the second half of the year usually account for two-thirds of a company's revenue.
Fong credited Hon Hai's China operations for the steep rise in profits. Hon Hai has been one of the most aggressive companies in Taiwan to build new factories in China, with about half of production already on the mainland. Fong said lower production costs helped raise Hon Hai's profit margin, which was lower than expected anyway due to the sharp slowdown in tech spending during the second quarter.
Fong expects a stellar second half for Hon Hai, driven by orders from customers like Sony Corp for PlayStation 2 game machines and by Dell Computer Corp and HP for computer cases, and Nokia for mobile phone components.
Hon Hai commands around 10 percent of the global market for made-to-order electronics parts, a sector dominated by Flextronics International Ltd of Singapore and Solectron Corp of the US.
Although its China operations will help Hon Hai going forward, the company faces some difficulty in its fledgling motherboard business.
As Hon Hai has diversified its operations into computer motherboard production, the circuit board that cradles all of the chips inside a computer, it stepped on the toes of a number of its Taiwanese counterparts.
Companies like Asustek Computer, Elitegroup Computer, Microstar International and Gigabyte Technology, the four biggest motherboard makers in the world, have been shifting orders for some components like connectors and cable assemblies, away from Hon Hai and to its competitors. So far, says Feng, Hon Hai has been content to watch these product segments wither.
Going forward, Hon Hai plans to focus on R&D and growing its sales base. The company passed Taiwan Semiconductor Manufacturing Co late last year as Taiwan's largest in terms of revenue.
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