Hon Hai Precision Industry – better known in the Western world as Foxconn – is the world’s top manufacturer of consumer electronics. And with Apple products – the iPhone in particular – accounting for at least 40 percent of its revenue, the contract manufacturer’s fortunes are tied to Apple’s.
Needles to say, the company’s leadership never complained about relying on Apple so much as long as sales were growing substantially. But with Apple’s growth cooling off amid a broader sales lull affecting pricey high-end smartphones like the iPhone, Foxconn is now looking to lessen its exposure on the Apple smartphone and is apparently gearing up for a mass-scale production of an Apple-branded television set, the rumored iTV…
According to a detailed Foxconn profile writer Lin Yand did for The New York Times yesterday, Foxconn CEO Terry Gou is now contemplating life far beyond Apple.
Terry Gou did almost everything that Apple could ask for. He made all those iPhones — and he made them cheap.
When Apple was subsequently criticized for low wages and poor working conditions at his factories in China, it was Mr. Gou’s company, the Foxconn Technology Group, and not Apple, that caught the most heat.
Apart from the ongoing woes related to working conditions at Foxconn plants that earned the newspaper’s iEconomy series a Pulitzer prize, the article goes on to note that Foxconn is now designing and building large, flat-screen televisions.
Thus far only 20,000 of Foxconn’s 60-inch TVs have been sold in Taiwan, a Foxconn spokesman told the paper. Launched last October, these products use as much as 90 percent of in-house components, including the LCD panel, backlighting and mechanical parts.
RadioShack in China and Vizio in the United States are selling Foxconn-made TV sets under their respective brands. For the time being, Foxconn has no intention of becoming its own brand in order not to compete with clients directly.
Apple, of course, has been rumored to be building a standalone television set of its own. According to the Central News Agency, Taiwan’s official news agency with inside source close to Foxconn, the iTV with Foxconn-made screens should be ready for introduction some time in 2014.
However, Foxconn’s entry into the TV set-making biz isn’t without its pitfalls.
Selling televisions when giants like Samsung, Sharp, Panasonic and Sony are struggling to turn profit in this highly volatile market segment could prove tricky, the report explains:
Here is Foxconn’s problem captured with two sets of statistics. Global demand for LCD televisions declined 1 percent in 2012 compared with the previous year, and demand for all TVs dropped 6 percent, according to NPD DisplaySearch.
Worldwide PC shipments fell 13.9 percent in the first quarter of 2013, compared with the same period a year earlier, according to IDC, IHS iSuppli and other relevant market research outlets.
Last June, Foxconn CEO acquire a 37.6 percent stake in Sharp’s Sakai plant. In explaining that some investors were concerned about investing in panels, he confirmed paying $840 million for the plant out of his own pocket.
As part of the transaction, Gou also committed to buying half the Sakai plant’s output.
“The Sakai plant has an exclusive agreement with Corning on large panel supply; so our competitors won’t be able to secure any glass even if they want it,” Gou said at the time.
Of course, designing and building TV sets sold under other people’s brands is only a band-aid solution that will help bridge the gap in production capacity and demand until that massive iTV order from Apple arrives.
Foxconn’s efforts to vertically integrate television manufacturing could be an “anticipation that orders for an Apple television” are due soon.
Most analysts say they believe Foxconn needs a larger TV customer. Televisions represent less than five percent of Foxconn’s business, far less than its revenue from Apple.
And some analysts think Foxconn is just biding its time, waiting for Apple to figure how to create a game-changing television product that will increase demand once again.
In addition to Apple gadgets, Foxconn also builds products for a number of well-known tech brands, including the likes of Apple, Dell, Hewlett-Packard and Amazon, among others.