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June 23, 2017

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Hon Hai, Sharp 'to ramp up plant construction'

TAIPEI, Taiwan -- Taiwan-based Hon Hai Precision Industry Co. (鴻海), the world's largest contract electronics maker, and its Japanese subsidiary Sharp have reportedly sped up plans to build a plant for the mass production of organic light-emitting diode (OLED) displays.

Japanese newspaper Nikkei recently reported that Hon Hai and Sharp may build a new 100-billion-yen (US$854 million) OLED factory in Zhengzhou, in China's east-central Henan province. The panels will be tailored specifically for Apple products, the report said.

Hon Hai, better known as Foxconn outside of Taiwan, has also set up an iPhone assembly plant in Zhengzhou, so the close proximity of Sharp's display production and the parent company's assembly plant will reduce logistical costs and give the group a competitive edge.

The Nikkei report said the Sharp plant has pushed its schedule forward to ramp up production earlier than the previous target of 2019 in a bid to compete with other Chinese rivals as media reports revealed that Apple has been exploring alternatives to address a global shortage of OLED displays for its next iPhones.

U.S. consumer electronics giant Apple is expected to roll out OLED iPhones later this year.

Sharp previously announced it would invest 200 billion yen (US$1.7 billion) in the OLED industry, including a prototype line at its Sakai plant in Osaka in 2018.

Chinese Rivals

Bloomberg reported last week that Apple has been in discussions with China's BOE Technology Group to supply next-generation displays for future iPhones.

BOE, one of China's largest screen makers, is spending nearly 100 billion yuan (US$14.5 billion) to build two AMOLED plants in Sichuan province.

While liquid crystal displays have dominated the smartphone touch display market since the beginning, OLED technology that allows for brighter images has long been eyed for next-generation screens.

Apple has long been Hon Hai's largest customer, as its products account for close to half of its sales for assembling iPhones. It also supplies metal casings and connectors for iPhones and iPads. Hon Hai, which received 54 percent of its profits from Apple last year, according to Citi Research.

Citi also estimates Apple will ship 110 million iPhone 8's in the second half of 2017, versus the previous 100 million, among which 50 percent will be OLED phones.

Besides assembling iPhones and iPads for Apple, Hon Hai helps manufacture devices for many of the world's biggest tech brands, including Samsung's Galaxy phone line and Sony's PlayStation 4.

In addition, analysts said, Hon Hai's efforts in pushing for Sharp's OLED investment also reflect the Taiwanese firm's ambitions to take on competition from South Korea's LG Display and Samsung Display, as well as Japan Display.

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