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May 29, 2017

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Hon Hai planning to expand investment in Taiwan: Gou

TAIPEI, Taiwan -- Terry Gou (郭台銘), the chairman of Hon Hai Precision Industry Co. (鴻海精密), the world's largest contract electronics manufacturer, said yesterday that the company will expand its investment effort in Taiwan starting in July.

With the iPhone 6 expected to be rolled out in fall, investors are upbeat about Apple contract manufacturer Hon Hai's performance down the road, which was reflected in Hon Hai's record-high share price yesterday.

Taiwan Semiconductor Manufacturing Co. (TSMC,台積電) is another local company which may benefit from the upcoming iPhone 6 launch. With higher demand for iPhone's A8 mobile processor, fingerprint recognition and power manager related integrated circuits, TSMC is posed to receive more orders in the second and third quarters.

With the highly anticipated iPhone 6, analysts expect improved performance from Apple's suppliers, and Hon Hai is likely to see much better performance in the third quarter. The company's revenues may grow 10 to 20 percent year-on-year in the second half, analysts forecast.

Stock Price Hits New Record

Hon Hai is scheduled to hold a shareholder conference tomorrow. The company's transformation plan, 4G, robots, Internet of Things, and operation in the second half of the year are among the subjects to be discussed in the conference.

Without Apple rolling out new products, Hon Hai's revenues took a hit and only had NT$1.49 earnings per share (EPS) in the first quarter. The company continued to suffer subpar performance in April and May, with sales dipping below NT$300 billion. Hon Hai's consolidated revenues in the first five months of the year were pegged at NT$1.45 trillion, up 3.15 percent from the same period last year.

Nevertheless, all this was within Gou's expectations, who had said that performance in the first two quarters was likely to be leveled, and operations would pick up momentum in the second half of the year. The market forecast that Hon Hai would become the sole contract manufacturer for Apple's 5.5-inch iPhone 6, while taking 70 to 80 percent of orders on the 4.7-inch iPhone 6.

With the rosy prospects, foreign investors have recently upgraded Hon Hai's target price to nearly NT$100. The company's share prices have been rising. It grew over 4 percent to reach as high as NT$98.6 before closing yesterday, which was a new record for the past 26 months. In the end, the share price went up 3.5 percent and closed at NT$97.6.

Labor Dispute in China

According to a Chinese-language news source, labor disputes have occurred in Hon Hai's Chongqing facility in mainland China, as a result of the company re-allocating human resources to adjust for declining orders from computer maker Hewlett-Packard.

Sources said with the laptop market slowing and Hon Hai tuning down its laptop manufacturing operations, workers have been displaced from HP's assembly line. Up to 800 people were involved in the labor dispute.

According to Hon Hai, a consensus has been reached with Chinese laborers, and the manufacturing facility is now operating normally.

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