Foxconn to step up procurements from Hon Hai subsidiaries in 2008

Foxconn International Holdings of the Hon Hai Group will procure US$190 million worth of products from the group's subsidiaries in 2008, up 80% from this year's anticipated US$106 million. The procurement amount will reach as high as US$394 million in 2010.

Foxconn said it would hold an interim shareholders conference in Shenzhen on Nov. 28 to discuss such topics as providing brand-new cellphone repair and maintenance services to customers, in addition to the increased procurements of supplies from Hon Hai subsidiaries.

An institutional investor noted the strengthened cellphone supply chain within the Hon Hai Group will squeeze out the supply chain outside the group as the brand owners have decisive rights on the procurement of parts and components.

Tung Wen-hsin, spokesperson for Foxconn, said the increased procurements would help Hon Hai Group vertically integrate the cellphone supply chain within the group.

At present, Hon Hai Group has a 72.15% shareholding on Foxconn which is listed on the Hong Kong Stock Exchange. Foxconn saw procurements of supplies from group subsidiaries account for 10.2%% of total sales in 2006, and the ratio reached 8.28% in the first half of this year.

Foxconn and Flextronics are currently the world's top-two cellphone contract manufacturers. Recently, Foxconn just received OEM orders from such big brands as Nokia and Motorola.

Focusing on the production of 3C (computers, communications, consumer electronics) products, Hon Hai Group is capable of providing full-package manufacturing and services to customers as it has integrated the supply chain for cellphone components inside the group.

As Foxconn has stepped up procurements of cellphone components from its subsidiaries, domestic suppliers fear losing global competitiveness.

source & copyright: CENS