14 DAY TRIAL // Hon Hai Precision Industry, which operates under the brand name Foxconn Electronics, used to slurp up its biggest profits on assembly contracts signed with Apple Inc. Not anymore, according to executives at the Taiwanese electronics company.
Because iPhone and iPad demand is on the decline (or so say Wall Street’s finest), Foxconn is planning to make inroads into the accessory market with its own hardware and software, including hardware for Apple devices which it will brand as its own.
Since retail operations provide higher profit margins than contract manufacturing, Hon Hai is also looking to open outlets in China, reports MarketWatch.
A Hon Hai executive, who declined to be named, confirmed the situation to the WSJ-owned publication, stating, “As our production capacity has grown to such a large scale and existing major brand customers offer limited order growth, we need to actively expand our client base to help increase our manufacturing volume.”
Other executives, who have direct knowledge of the plan, reportedly said Hon Hai is also reviewing plans to make accessories under the Foxconn brand, including data transmission cables, headphones, and keyboards.
“Chairman (Terry Gou) has ordered all business units to produce peripheral accessories of electronics products as it is more profitable than assembly services,” said one of the people.
“We also plan to license Apple's technology to make some own-brand accessories that are compatible with iPhones and iPads,” the executive confirmed.
According to the report, Foxconn’s ultimate goal is to deliver add-ons, be they software- or hardware-based, for all the devices it assembles. That may well include Apple’s rumored iWatch and iTV.
MarketWatch hints at one of the two products when it reports that Foxconn is staffing up on mobile application development, cloud computing technology, “and applications for smart watch devices.”