Just as we’ve digested the news about Apple’s favorite manufacturer Foxconn buying an eleven percent stake in Japanese giant Sharp (apparently in order to better compete for display orders from Apple), a new report surfaced claiming the iPhone maker itself is considering investing a whopping $9.76 billion in Foxconn.
The sum would be enough for a 20 percent stake in the Asian manufacturing powerhouse. Is this why Tim Cook toured China a week ago? Surely an investment this big would let Apple have a greater say on working conditions in Foxconn plants.
The two partners would also get to collaborate more tightly on new projects that require in-depth knowledge of the intricacies behind large-scale operations run by Foxconn, Apple’s strategic manufacturing ally.
The rumor was first reported on a Chinese website. The story claimed Foxconn was gonna issue new shares in the form of global depositary receipts, thus making Apple its second largest shareholder.
Interesting enough, the article has been pulled. Forbes picked it up, however, and opined:
Hon Hai currently has a market capitalization of about $40 billion, meaning an investment that size, presuming it was new shares, would make Apple the owner of about 20 percent of Hon Hai’s shares.
The nearly $10 billion investment is peanuts compared to Apple’s $100 billion cash pile. Both Foxconn and Apple have grown dependent on each other. Foxconn’s fortunes depend on Apple’s massive orders while the iPhone maker relies on Foxconn’s ability to respond swiftly to the ever-growing demand for Apple’s gadgets.
And it wouldn’t be the first Foxconn and Apple made investments for the benefit of their business. For example, it’s widely assumed Apple bought a thousand expensive Fanuc CNC machines so Foxconn could make Unibody MacBooks.
And last summer, the Chinese Economic Daily News reported that Foxconn was considering spending NT$47B, or approximately $1.6 billion, to build a chain of small retail outlets all over China that would sell Apple’s products.
Assuming Apple is seriously considering buying a stake in Foxconn, the timing couldn’t be better. Foxconn shares are down 34 percent annually, mostly due to the public outcry and negative publicity born from horror stories describing miserable working conditions at Foxconn plants.
Foxconn is the world’s largest contract manufacturer, employing an estimated million workers, mostly young people from rural parts of the country.
It makes iPhones, iPads and Macs for Apple, but on its list of clients are the likes of Amazon, Dell, Hewlett-Packard, Sony and other industry heavy-weights.
What’s your read, why would Apple want to invest in Foxconn?