Hon Hai, better know for its Foxconn manufacturing unit, said on Friday it has set up a research and development (R&D) firm in Japan to strengthen its display technology offering.
The new R&D facility will develop displays and touch panels, reports Reuters, following its acquisition of a 38 percent stake in Sharp's television panel plant in Sakai, Japan last year.
It comes at a time when the firm is looking to diversify away from contract manufacturing business, in which it continues to suffer from low margins across the board. The display unit will focus on consumer, commercial and medical products, the company said in a statement.
The company, which remains the main manufacturer of Apple products, is currently under threat from rivals, notably Pegatron, which is muscling in to make a claim to Apple's supply chain.
Hon Hai did not disclose the amount it was investing in the R&D facility.
It comes just days after The Wall Street Journal said Hon Hai was looking to add new contract manufacturing customers away from Apple as it seeks to launch its own branded product. The electronics maker invested vast amounts in its production lines to set up shop for iPhone and iPad manufacturing.
Analysts weighed in on the news. Fubon Research analyst Arthur Liao warned that Hon Hai's second and third quarter sales will fall or be flat following the "soft demand" for the iPhone 5 and its expected upcoming successor.
Meanwhile Macquarie Capital analyst Daniel Chang noted that Hon Hai needs a "major restructuring" to make it more efficient. Chang said Apple accounts for 40-50 percent of its sales.