Nokia Oyj, the world's leading celluar telephone vendor, will buy wireless handsets from Taiwan's Hon Hai Precision Industry Co (鴻海精密), as the biggest mobile-phone maker joins rivals in farming out production to cut costs amid slowing sales.
Hon Hai, whose customers include Compaq Computer Corp and Intel Corp, will ship 200,000 phones a month to Nokia starting in January, a Chinese language newspaper said. Nokia's order, the first it has placed with a Taiwan company, may be worth as much as US$168 million a year, investors said.
"Hon Hai's aim is to deal with the top one or two customers in the world, no matter what kind of business," said Pedro Tai, who manages US$150 million in stocks, including Hon Hai shares, at HSBC Asset Management Taiwan. "If it can sustain and deliver the service and quality to Nokia's [standards], they'll probably increase their outsourcing."
Hon Hai, Taiwan's biggest computer-parts maker, is focusing on communications and consumer devices such as mobile phones and game consoles for future growth.
Sony Corp may give Hon Hai part of an order to assemble as much as 30 percent of its annual PlayStation 2 video-game console production, Goldman Sachs Group Inc said last week.
Hon Hai spokesman Edmund Ding (丁憲文) declined to confirm the report. The company, which has set up most of its production in China to cut costs, doesn't comment on its customers, Ding said.
Nokia's order wouldn't be the first that Taiwan handset makers have received from the biggest mobile phone makers as they try to cut costs in a contracting market that's pushing companies into a loss.
Acer Communications & Multimedia Inc (明電), Taiwan's biggest mobile phone maker, manufactures handsets for Motorola Inc, Nokia's biggest rival. Arima Computer Corp (華宇電腦) and GVC Corp (致福) make phones for Ericsson AB.
Yesterday, Motorola predicted a quarterly loss and cut its mobile phone sales forecast to between 380 million and 400 million handsets, down from earlier forecasts of 400 million to 425 million.
Global handset sales fell 7 percent in the second quarter, according to Gartner Inc's Dataquest Inc. Last year, sales increased 46 percent to 413 million units, according to the market researcher.
With growth in the US and European markets slowing, firms are betting on China to boost sales. In July, China overtook the US as the world's biggest cell-phone market. Nokia is investing US$12 billion building an industrial park outside Beijing to make handsets and cellular base stations.
Hon Hai expects to complete construction of a mobile phone factory in Beijing next to Nokia's plant by the end of this year.
Hon Hai also plans to set up a venture in China with World Wiser Electronics Inc (
Hon Hai rose NT$7.50, or 6.8 percent, to NT$117.50. Its shares have fallen 18 percent in the past year.
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