Hon Hai Precision Industry Co., Ltd. : Hon Hai To Restructure Business Model, Further Improve Workers' Conditions
05/10/2012| 04:23am US/Eastern
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--Hon Hai Precision Industry is restructuring its business model to include R&D, services, chairman Terry Gou says
--Hon Hai will further improve workers' conditions, Gou says
--Hon Hai is targeting 10%-15% revenue growth this year, and will at least achieve 10% growth, Gou says
(Recasts first paragraph, adds comments on revenue growth in 3rd paragraph, automation in 5th paragraph, wages and working conditions in 6th and last paragraph, repositioning in 7th-8th paragraphs.)
By Esther Fung
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Hon Hai Precision Industry Co. (2317.TW), the contract manufacturer of Apple Inc.'s (AAPL) iPhone and iPad, is looking to restructure its business model to focus on services and research and development, while pledging to further improve workers' conditions, Chairman Terry Gou said Thursday.
Hon Hai, which also uses the trade name Foxconn, will also "strive to be the highest paying employer in the industry," Gou said at a ground-breaking ceremony of a sales center in Shanghai.
Gou said that Hon Hai is targeting 10% to 15% revenue growth this year and would at least achieve 10% growth, and added that he remains optimistic over the company's long term prospects, despite its recent lacklustre first-quarter profit. Gou said Foxconn is looking to restructure its business by focusing on R&D, concentrating on China's domestic market, and services for consumers, apart from its main manufacturing business.
Following a spate of suicides at its China facilities over the past two years, which have drawn global scrutiny to its labor practices, Hon Hai has sped up in using more automation, particularly for "dangerous and monotonous" tasks. An increase in orders from customers and rising wages in China have also led the company to increase automation to save production costs.
Gou said that Hon Hai aims to increase use of robotic arms to 1 million units in five years, longer than the previously 2013 target because key components and technology know-how are still inadequate.
"I believe employees in Foxconn, and in other manufacturing companies in China, will eventually earn as much as their counterparts in the U.S. But jobs will stay in China due to higher manufacturing efficiencies," said Gou, who didn't give further details.
The company, whose overall margins and profitability dropped in the first quarter, is looking to reinvent itself as it invests more in e-commerce and developing fresh products that would be quick to reach the market, said Gou, adding that Hon Hai's partnership in Japan's Sharp Corp. (6753.TO) will yield synergies for both in the panel industry.
"We will gain an important global leadership position in a few years' time," Gou said, adding that Hon Hai would like to increase its stake in Sharp from the 9.871% stake acquired in March, but Sharp has declined.
Gou spent more than an hour in a press briefing at the construction site of the Shanghai Foxconn Headquarters, fielding questions over salaries and working conditions, and repeated several times that there must be "an apple-to-apple comparison" when discussing these issues. He added that Foxconn and Apple are sharing the initial costs of improving workers' benefits.
-By Esther Fung, Dow Jones Newswires; 86-21-6120-1200; esther.fung@dowjones.com
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