Hon Hai Pads Lead in Electronics Manufacturing

Hon Hai Precision Industry Co., the world’s biggest electronics manufacturing service provider, on Friday released its earnings for last year, showing it widened the gap against its main rival, Flextronics International.

An early effort to build factories in China and sheer size have benefited Hon Hai, analysts say. The Taiwanese company began shifting production to China for its low-cost labor and favorable tax laws earlier than most rivals, helping it to offer better prices to customers. Its huge sales volume has helped as well, enabling Hon Hai to pay less for components by ordering in bulk.

The company, which produces a range of IT items for multinationals, including PlayStation 2 game machines for Sony Computer Entertainment and mobile phones for Motorola, reported its sales rose to $673.50 billion new Taiwan dollars (US$20.50 billion as of Dec. 31, the last day of the period being reported), from NT$421.67 billion a year earlier.

Its net profit rose to NT$40.78 billion from NT$29.76 billion.

By comparison, the company’s main rival, Flextronics, which is based in Singapore, saw its revenue and net profit decline in its most recent financial year, which ended March 31. Flextronics reported its revenue last year fell to US$15.29 billion from US$15.73 billion a year earlier, and its net profit was cut by more than half to US$141 million.

Flextronics has been working to regain its lead in the electronics manufacturing services business. The company has sold off its semiconductor, networking and software operations in the past fiscal year in a bid to focus on its core contract manufacturing business.

In a Thursday statement, Flextronics said it expects its turnaround efforts to show up on improved sales in the second half of this year.

“Overall, we feel [last year] was very successful for the company as we executed our plan to divest non-core assets and focus our efforts and resources on the reacceleration of the significant growth opportunities in our core EMS business,” said Mike McNamara, chief executive officer of Flextronics, in the statement.

For related news coverage, read Flextronics Sells Software Unit for $900 Million.

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— Dan Nystedt, IDG News Service