Analysts optimistic on Foxconn’s plans to expand in China


TAIPEI — Foxconn Technology Group, one of Apple Inc.’s major suppliers, is likely to expand its production capacity in China to churn out more products for the U.S. consumer electronics giant, an analyst said yesterday. With such expansion, the group would ride the wave of Apple sales in 2012, Grand Cathay Securities analyst Mars Hsu said in response to a media report that Foxconn is mulling expansion in China.

According to China’s Xinhua News Agency, Apple CEO Tim Cook met with Foxconn Chairman Terry Gou to discuss the possibility of expanding Foxconn’s production base on the mainland. Foxconn, known as Hon Hai Group in Taiwan, employs about 1 million workers at four production locations in China, producing Apple’s popular iPhone and iPad. “I think an expansion of Foxconn’s production is very likely since Apple is gearing up to launch new devices on the global market,” Hsu said. “Apple tends to lay down a long term development plan and it is understood that it wants its suppliers to follow.” Apple is widely expected to unveil its iPad 3 in the first quarter of this year and its 2012 shipments are forecast to soar to 70 million units. Meanwhile, its iPhone 5 is likely to be launched later this year. Hon Hai Precision Industry Co., which is listed on the Taiwan Stock Exchange, is the flagship company of Foxconn. Hsu estimated that Apple accounted for about 40 percent of Hon Hai Precision’s consolidated sales for the fourth quarter of 2011, driven particularly by the launch of iPhone 4S in October. iPhone 4S sales of 37 million units in the fourth quarter of last year beat all market expectations. “With a major customer like Apple, expansion will pave the way for Hon Hai Precision’s growth,” Hsu said. “Many investors are happy with Hon Hai Precision’s stable sales generated from its work for Apple.” Hsu said Hon Hai Precision is expected to see an improving gross margin and falling operating costs in 2012 after it relocates its production lines inland from Shenzhen on China’s southeastern coast. Hon Hai Precision’s earnings per share could rise to NT$9.5-NT$10 this year from an estimated NT$7.1-NT$7.2 last year, he forecast. In the first nine months of last year, the company generated NT$4.37 in net profit per share.