TAIPEI -- Foxconn International Holdings, the cellphone design and manufacturing arm of Hon Hai, has seen capacity utilization rates fall below 50%, according to a new report.

Daiwa Capital Markets says the low utilization rates coupled with the continuing losses at the unit are reason enough for Hon Hai to consider taking FIH private.

Daiwa said FIH's new campus in Hebei province and other, smaller sites around China are operating at capacity utilization rates below 50%. Hon Hai could take on that idle capacity and reduce its capex by $1.2 billion, the book value of its fixed assets, Daiwa said.

FIH lost $226 million in its fiscal first half. The company, like Foxconn Electronics, is a subsidiary of Hon Hai.