Hon Hai expands efforts in semiconductor development

07/25/2020 02:09 PM
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Taipei, July 25 (CNA) Hon Hai Precision Industry Co., a Taiwan-based electronics manufacturing giant, has expanded its efforts in entering the semiconductor industry by setting up a high-end integrated circuit packaging and testing plant in Qingdao of China.

The Qingdao compound broke ground earlier this week and is expected to begin production in 2021, with the company, which is also known as Foxconn in the global market, aiming to achieve mass production at full capacity in 2025.

It will provide high-end packaging and testing services for chips used in 5G communications and artificial intelligence applications.

This latest effort in semiconductor development echoed Hon Hai Chairman Liu Young-way's vision (劉揚偉). He has laid out the company's goal for a technology upgrade by entering emerging technology development such as electric cars, digital medical care and robots.

To meet the requirements to compete in these emerging technologies, Liu said Hon Hai has intensified its development of semiconductor, AI and new generation communications technology.

Before Liu took the chairmanship of Hon Hai and succeeded Terry Gou (郭台銘), who stepped down in June 2019 to run for president, Liu headed Foxconn's semiconductor operations. Gou, one of the richest people in Taiwan, is the founder of Hon Hai.

The market has estimated the Qingdao IC packaging and testing plant will cost Hon Hai about 60 billion Chinese yuan (US$8.57 billion) or more than NT$250 billion.

Prior to investing in the Qingdao plant, Hon Hai had already poured funds in 3D chip packaging and testing services and other advanced processes such as Panel Level Packaging (PLP) and System in a Package (SIP) for 8K TV use.

According to Hon Hai, Hon Hai has secured approval from Taiwan's Investment Commission to invest US$16.93 million in an IC packaging and testing firm located in southeastern China's Shenzhen city.

In addition, Hon Hai signed a strategic cooperation agreement with the government of Zhuhai city, also in southern China, in August 2018 to forge closer ties in semiconductor development, including IC design, and to transform the Chinese city into a semiconductor development hub.

Hon Hai is also one of the partners in a plan announced by the Jinan city government in Shandong province in February 2019 to develop the semiconductor industry there, according to Chinese news media.

In Taiwan, Hon Hai owns semiconductor subsidiaries such as Ennoconn Corp. and Foxsemicon Integrated Technology Inc. Through those units, the parent company is able to extend its reach into the local semiconductor industry.

In recent years, Hon Hai has repeatedly shown its ambition to transform itself from a pure hardware manufacturer to a company which is able to integrate its hardware and software strength to boost profitability.

In the initial phase of its plan to diversify, Hon Hai's gross margin -- the difference between revenue and cost of goods sold -- is expected to increase by 1 percentage point to 7 percent, and when its upgrade is completed, the company's gross margin will likely rise to 10 percent by 2025, according to Liu.

(By Chung Jung-feng and Frances Huang)

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