The Foxconn transition: a slowdown in foundry business in mobile distribution and telecommunications

Hon Hai, a Taiwanese manufacturer known for assembling most of Apple's iphones and ipads, is quietly building its brand, the Wall Street Journal reported June 28.

Recently, the company, which has a 130 billion-dollar annual revenue, has ventured into its own-brand mobile phone accessories, handset sales and distribution sectors. It also plans to provide telecommunications services in Taiwan.

In some ways, it is necessary for Foxconn to build its own products and services. Last year, the company's revenue growth was only 1% per cent, compared with Apple, which launched its first ipad in 2010, with a growth rate of 53%, most of which were completed by Foxconn.

Foxconn's labor costs have increased by more than a year since 2009, leading customers, including Apple, Sony and Microsoft, to transfer some orders to their rivals because they can get better prices.

From Shenzhen in the south to Zhengzhou in the north, Foxconn employs more than 1 million workers in China. External audits and workers ' protests prompted the company to raise wages, raising overall costs.

Net profit growth fell from 37% in 2009 to 13% last year. Earlier this year, Apple began handing over parts of its iphone and ipad OEM orders to the two Foxconn rivals of the company, according to people familiar with the matter.

At the moment Foxconn still earns half of its income from Apple, but the 63-Year-old company's founder, Terry Gou, says the low profit margins of the labour-intensive contract-generation approach are not enough to spur revenue growth.

"Business transformation is the key to Foxconn's sustainable growth over the next 10 years. "This week Mr Gou told shareholders at the company's annual meeting.

Mr Gou founded Foxconn in 1974, the first to produce a plastic knob for black-and-white television. The company began extending its business to personal computer assembly in the early 80, and since the beginning of the 90 Foxconn has been providing computer components for Apple.

Over the past 20 years, Apple and Foxconn have collaborated on products including ipods, iphones and ipads. This makes Foxconn a household name and makes it the world's biggest seller of electronic contracts.

At the shareholders ' meeting, Mr Gou said he wanted to "test a new business model that integrates software, hardware and wireless networks." The business will be launched first in Taiwan and then expanded globally. ”

It is unclear how much help Foxconn's new product will bring to its revenue, and Foxconn has not disclosed more details about the business.

Foxconn has recently taken a series of new initiatives, such as the release of its own mobile phone accessories, called Coverbank, and the Bluetooth headset named Candyard. Some analysts expect Foxconn to release more devices, such as smartphones, next.

Foxconn had previously said it would not use its products to enter the smartphone market. Instead, the company will enter the smartphone distribution field. Foxconn plans to help BlackBerry sell handsets through its local distribution partners in India and Indonesia, according to an insider.

Foxconn and BlackBerry have signed a five-year cooperation agreement at the end of 2013, which will be responsible for the assembly and inventory management of BlackBerry handsets.

"This partnership gives us an unprecedented depth of engagement in a global brand sales and delivery process that allows us to gain valuable market data and build our own retail distribution collaboration system." Said a Foxconn manager. A BlackBerry spokeswoman declined to comment on the issue.

The company wants technology patents as a way to increase revenue in the future, according to a former Foxconn executive who understands Mr Gou's idea. People familiar with the matter said Foxconn had previously invested in technologies such as biosensors that included wearable equipment. Last October, Mr Gou said the company had filed 300 patents for face recognition technology.

Last year, Foxconn sold its helmet-tech patent to Google, an unspecified amount. In 2013, Foxconn has become the top 20 patent-holding company in the United States, according to envision IP data from the new york-based patent consulting firm.

"Foxconn can integrate royalties into its production, which is a luxury for other competitors," he said. "Mao Lin Shah Maulin Shah, managing director of Envision IP, said. Foxconn declined to comment.

In addition, Foxconn has launched an online platform called Kick2real, which allows entrepreneurs to turn their ideas into prototypes for free. If the product is true, Foxconn can assemble and profit from it.

Mr Gou admits that some of the company's plans may eventually fail, and he is looking at these trends based projects. "Learning from failure is much cheaper than buying some successful companies directly, and we can adjust our new business." "he said.

Foxconn has recently entered the telecom market in Taiwan, and is expected to start offering 4G services from next year. (Dream)