Consumer electronics assembler Hon Hai bets on AI, digital transformation

23, Jun. 2020

Photo by Arseny Togulev on Unsplash
Photo by Arseny Togulev on Unsplash

TAIPEI, NNA - Hon Hai Precision Industry Co., the world’s largest electronics contract manufacturer, will transform itself from assembler into high-tech company to achieve future growth, Chairman and CEO Liu Young-way pledged at its annual shareholders meeting on Tuesday.

As part of its efforts to upgrade its labor-intensive business model, the Apple gear assembler plans to open its own research institute to gear up five technology fields – artificial intelligence, semiconductors, next-generation information and communications technology, cybersecurity and quantum computing, Liu said.

The company, internationally known as Foxconn Technology Group, is eyeing three industries – electric vehicles, digital healthcare and robots – with growth potential to reach a combined $1.4 trillion by 2025.

The three sectors would grow at a compound average growth rate of 20 percent and “prompt us to tap into and yield profits,” said Liu.

In a bid to cash in on such growing sectors, AI, semiconductors and next-generation ICTs are keys to further investment, Liu said at the meeting in New Taipei City.

The company would have to go through such stages as optimization in its current operations and digital transformation in various business fields. Digital transition has already been applied in some departments.

“Through the plans, the management team aims to drive our gross margin from the current 6 percent to 10 percent by 2025,” Liu said.

Regarding future plans for Southeast Asia and other regions, Liu said that "India is now under the impact of the coronavirus pandemic, but there are prospects for future growth," adding the firm will announce further investment plans for Asia’s third-largest economy within a few months.

Hon Hai logged group revenue of NT$1.7 trillion ($56.9 billion) in the first five months of this year, a 6.7 percent drop from a year earlier. In February, the sales figure was the weakest since August 2011, dragged down by the spread of COVID-19 in mainland China, according to the company.

Liu attributed the huge decline largely to the halt of operations at its Chinese plants caused by the novel coronavirus pandemic, but deteriorated earnings were later offset by support from clients and local governments, he said.