Hon Hai, Foxconn: More than Apple's iPad, iPhone

Hon Hai Precision Industry---a company best known for making Apple products like the iPad---outlined production improvements, data center plans and diversification efforts into new markets.

Hon Hai Precision Industry---a company best known for making Apple products like the iPad---outlined production improvements, data center plans and diversification efforts.

The buzz about Hon Hai, which makes the iPad with its Foxconn subsidiary, was that Chairman Terry Gou said that Apple's tablet have hampered margins because they are "difficult to make." Hon Hai expects margins to improve in the latter part of 2011 though and overall the difficulty of making the iPad is the least of the company's worries.

If you zoom out a bit Apple accounts for about a quarter to a third of total sales. That's a big chunk of change from an Apple-Hon Hai relationship that goes back 30 years, but there's more to the company. KGI analyst Angela Hsiang said that Hon Hai's Gou is focused on industrial components, emerging markets, automating production and cloud computing.

Barclays Capital analyst Kirk Yang noted the following from Hon Hai's annual shareholder meeting:

  • Gou said margin declines are largely attributed to relocating production to inland China. That move included several hundred thousand people. In other words, Gou's company moved a city. Meanwhile, Hon Hai had duplicate iPad production facilities during the relocation. That fact---more than the difficulty making iPads---hurt margins more than anything.
  • In the long run, Hon Hai is focusing on cooperation with Japanese companies like Sharp, Hitachi and Canon, making solar equipment eventually and improving management skills.
  • Servers are also a key business. Hon Hai makes two-thirds of the globe's servers.
  • Hon Hai doesn't plan on ditching notebook manufacturing.
  • Hon Hai has $12 billion bet on Brazil over the last five years.
  • And the company is investing heavily in its data center capacity so it can take order, design and manufacture goods in a 12 week cycle in an energy efficient manner.

Overall, there's much more to Hon Hai than Apple.

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