There is a ripple effect underway in the smartphone industry. As consumers shift from high-priced smartphones to basic lower-cost alternatives, companies such as Apple look to produce lower-priced handsets. The latest in line are manufacturers, such as Foxconn, which for years has tied its profit wagon to Apple’s success. Now comes word Foxconn’s parent company seeks to diversify into e-commerce and perhaps licensing its vast library of patents…
Because Apple sales supplied 60 percent of the $100 billion in 2012 profits, Foxconn’s parent Hon Hai has determined that the iPhone maker’s slowing growth makes them “keen to diversify into higher-margin business,” Reuters reports.
Foxconn’s sales were down 12.6 this year through May, compared to last year. The firm had set a target of fifteen percent growth.
“Hon Hai’s earnings momentum in the first half seems soft, due to lack of new product launches by Apple,” Reuters quotes an executive of a Taiwan-based investment management firm.
To combat what Reuters described as “slowing growth and changes in consumer taste,” Hon Hai Chairman Terry Gou outlined plans to add 5,000-10,000 engineers to the 6,000 it currently employs on Taiwan. Those engineers will concentrate on research and development along with software and patent rights.
The firm is No. 8 among patent-holders, according to the report. Also, after a failed German retail venture, the company plans to enter online sales in China.
But despite having 20 businesses units, Hon Hai is most-known for Foxconn. That unit is pressing forward with plans to manufacture and sell mobile phones to Indonesia’s consumers, along with a continued expectation of expanding its U.S. operations.
As we reported earlier, Foxconn has already made plans to become less reliant on Apple’s orders, developing its own line of accessories and making smart TVs for other brands.
At the same time, there are hints Apple may be preparing to away from depending upon Foxconn for manufacturing all devices.