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Talk of the Day -- Hon Hai eying Asia's emerging markets

2012/08/15 23:11:43

Hon Hai Group, the world's largest contract electronics maker, will invest up to US$10 billion in Indonesia in the next five to 10 years to produce electronic devices such as mobile phones, e-books, tablet computers and smart TVs, according to media reports.

If the plan is realized, Indonesia will become Hon Hai's largest investment destination in the Southern Hemisphere, the reports said.

Unlike its previous overseas investment projects, the group's Indonesia project will not be just a production base but rather is aimed at tapping into the Indonesian market.

A spokesman for Hon Hai Precision Industry Co., the group's flagship company, said the Indonesia investment project is still being assessed and that no decision has been made yet.

The following are excerpts from a special report in the Wednesday edition of the United Evening News:

Industry sources said Hon Hai's plan to invest in Indonesia will be part of that country’s import replacement strategy, under which Hon Hai will not only produce electronics in Indonesia but will also sell them there.

With a population of more than 200 million, Indonesia is seeing booming growth of its consumer market, the sources said. The Southeast Asian country imports 4 million handsets each year.

Against this backdrop, the sources said, Hon Hai's negotiations with the Indonesian government have been focused more on market access than on production.

At the invitation of the Indonesian government, senior Hon Hai executives made a fact-finding visit to Indonesia this week.

Reports from Jakarta said the Indonesian government expects Hon Hai to use its advanced electronic production technology and marketing expertise to help Indonesia upgrade its industrial technology.

Local market sources further said Hon Hai is also mulling to launch massive investment projects in Malaysia as part of its efforts to tap into emerging Asian markets.

Hon Hai has set up footholds in China, Japan, Vietnam, Turkey, Hungary, the Czech Republic, Finland, Russia, Brazil, Mexico and the United States.

Foreign wire service reports said Hon Hai's investment project in Indonesia may begin with building a production facility that can churn out 3 million handset a year initially.

Construction of the plant may be launched in October this year, the reports said, adding that the production line will be expanded in the second stage that will begin in 2013.

When the expansion project is completed, the facility will be able to turn out 10 million handsets annually.

In the long run, the reports said, Hon Hai Group will also produce e-books, tablets and other modish gadgets in Indonesia.

Also on Wednesday, Hon Hai said the company's cooperation program with Japanese electronics maker Sharp Corp. will remain unchanged.

Hon Hai issued the statement after Sharp's share price fell to a 38-year low in the Tokyo market.

The two companies will issue a joint statement on their partnership at the end of August, Hon Hai added.

Hon Hai and three of its affiliates -- Foxconn Technology Co. Ltd., Foxconn (Far East) Ltd. and Q-Run Holdings Ltd. -- struck a deal with Sharp March 27 to acquire a 9.871 percent stake in Sharp for about US$800 million, or 550 Japanese yen-per-share.

Sharp's bottom line has since worsened, and the company on Aug. 2 projected its losses in 2012 at 250 billion Japanese yen (US$3.2 billion), far higher than an earlier estimate of 30 billion yen.

Hon Hai said on Aug. 3 that it has come to a new consensus with Sharp that the group will not have to fully meet the terms laid out in the original March 27 investment deal.

Hon Hai said Sharp will still sell it the same stake agreed upon in March, and the fields of cooperation outlined in the deal will remain unchanged, but the two companies will renegotiate the price of Hon Hai's investment. The new investment terms are expected to be announced at the end of this month. (Aug. 15, 2012).

(By Sofia Wu)