Foxconn Technology Group (富士康科技集團) is exploring the sale of its new US$8.8 billion display panel factory in China, people familiar with the matter said, as demand for the product wanes amid an intensifying US-China trade dispute.
Foxconn, known as Hon Hai Precision Industry Co (鴻海精密) in Taiwan, is in talks to appoint banks to find a buyer for its LCD factory that is being built in Guangzhou, China, two people with direct knowledge of the matter said.
A sale would come at a delicate time for Foxconn, which has extensive investments in China, a large roster of US clients that includes Apple Inc and is having to navigate a tricky path amid the protracted trade dispute between Washington and Beijing. It would mark one of its largest divestments from China.
Photo: Reuters, Tyrone Siu
Foxconn’s discussions are at an initial stage and it has not yet come up with a price tag for the so-called 10.5G facility specializing in large-screen LCDs, the sources said, adding that a sale was not a surety.
“It’s not an easy sale and it could take a while,” said one of the sources, citing tepid global demand for large-screen LCDs.
“As a matter of company policy, Foxconn does not respond to market rumors or speculation,” Foxconn said in a written statement.
US President Donald Trump on Thursday sharply raised the stakes in the bruising trade dispute with China and jolted global financial markets by vowing to impose a 10 percent tariff on US$300 billion of Chinese imports from Sept. 1.
The trade dispute has disrupted technology global supply chains in a major way, forcing Foxconn to review its own.
That and slowing demand for large-screen TVs and monitors had prompted Foxconn’s management to seek a buyer for the LCD plant, one of the sources familiar with the management’s thinking said.
Questions were also being raised within Foxconn about the need for the Guangzhou project.
“Existing plants are already not running at full capacity... Why need another one?” the source said.
The second source said that the new factory would not begin production until early October, which makes it less appealing for buyers because of the additional risks compared with a plant already operating.
The Nikkei earlier this year reported that the company would delay most of its planned production in Guangzhou for a minimum of six months, but Foxconn said that the project was on schedule.
Dubbed the largest single investment ever in the southern city by Chinese media, Foxconn announced the Guangzhou plant in 2016, hoping to start operations by this year to meet an expected rise in demand for large-screen TVs and monitors in Asia, in a challenge to top Chinese display maker BOE Technology Group Co (京東方).
The project was mainly run by a joint venture between the Guangzhou government and Japan’s Sakai Display Products, an advanced panel factory owned by Foxconn founder Terry Gou (郭台銘) and Japan’s Sharp Corp, Foxconn’s display unit.
The Japanese panel maker on Thursday said that it would build a plant in Vietnam to make flat screens and electronic devices to guard against additional US tariffs on Chinese goods.
The global display industry has been struggling with a supply glut and tumbling earnings due to moribund sales of TVs and smartphones, and the worsening trade dispute that could raise product prices and dampen consumer demand.
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