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July 27, 2017

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Hon Hai Precision confirms plan for US$1 billion investment in Indonesia

Hon Hai Precision Industry Co. Ltd. confirmed yesterday that it has signed a letter of intent to invest US$1 billion in Jakarta in the next 3 to 5 years.

The company said it will dispatch a team of employees to the Indonesian capital to study local conditions for facility building in the near future.

It plans to deliver a formal project plan to the Indonesian authorities within three months.

The Taiwan-based Hon Hai, better known internationally by its trading name Foxconn, is the world biggest contract electronics manufacturer.

Local media reported on Friday that Hon Hai Chairman Terry Gou signed the letter of intent with Jakarta Governor Joko Widodo.

The letter of intent signed by Hon Hai reflects the contract electronic manufacturer's ambition to sell products locally instead of exporting them, analysts said Saturday.

Hon Hai's next step in its strategy targeting large home markets will be to invest in the United States, the analysts said, as many of its clients have urged the company to manufacture goods there.

Gou expects the U.S. to remain the world's largest market for the next 20 years, they said.

Analysts said the investment in Indonesia is strategically important to Hon Hai, which assembles iPhones and iPads for Apple Inc. and churns out electronics devices for other international brands, such as Sony, Dell and Hewlett-Packard.

The company, also known as Foxconn, has said it intends to use Jakarta as a gateway into Indonesia, which it sees as being a potentially huge market for consumer electronics with a population of 240 million people that is relatively young.

Hon Hai estimates that the country's mobile phone market could grow to roughly 50 million units a year.

While Hon Hai said it needs some time to finalize the details of its investment plan, analysts said the Taiwanese firm has to find a good Indonesian partner to help it read the pulse of Indonesia's market and better understand consumer tastes.

Hon Hai's presence in Indonesia will also establish the company as a bridge between the electronics industry in Indonesia and the global supply chain and strengthen the Southeast Asian country's information communications technology development.

They said Hon Hai has never been satisfied with simply being a manufacturing giant and is trying to evolve into an information technology services provider.

FIH Mobile Ltd., a Hong Kong-listed subsidiary of Hon Hai, established a strategic alliance with cellphone vendor BlackBerry in late December, and the two companies plan to set up a data center in Indonesia, analysts said.

As for the U.S. market, Gou has said that investing in the U.S. will become a key part of the company's development strategy over the next three years.

According to Gou, several states have discussed potential investments, and he is carefully studying potential opportunities.

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