Foxconn Parent to Restructure into 'Carrier'
TAIPEI -- Foxconn will split itself into multiple companies as the contract manufacturing behemoth tries to boost its profitability and possibly shed underperforming business units.
Foxconn, the trading name of Hon Hai Precision Industry Co., will start by breaking out its touch screen and digital camera module businesses, founder and chairman Terry Gou today shareholders yesterday.
In the future, Hon Hai will resemble a holding company, with several individual subsidiaries made up of as yet to be disclosed businesses.
“Hon Hai will have the scale of a large firm and the flexibility of smaller firms,” Gou said, "like a carrier, supported by smaller battleships."
Foxconn is by far the world's largest electronics manufacturing services company, with a customer list that stars Apple, H-P, Dell, Motorola Mobility and other blue-chip names. However, despite annual sales more than twice that of Flextronics, its largest competitor, and an in-house supply chain that stretches from motherboards to connectors to printed circuit fabrication, assembly and box build, the company is finding it harder to leverage its size advantage, and overall gross margins fell 137 basis points year-over-year to 8.15%.
Much of the problem stems from the company's contract cellphone arm, Foxconn International Holdings, which lost $218 million on sales of $6.63 billion last year. Still, Gou deflected criticism of the drop, saying it was the byproduct of higher R&D and capacity spending. The company would see the return on its investment next year, he said.
Nevertheless, Gou also said the firm would jump into the solar manufacturing market later this year, a highly competitive market that likely will add margin pressure.And he said the firm would push toward greater vertical integration, giving customers a supplier that would design, manufacture, support and inventory end-products -- and even provide a retail chain in which to sell them.
