Apple partnership boosting Foxconn market share
Though it's had to wrestle with controversy over a rash of plant suicides this year, Foxconn is grabbing more revenue and higher market share.
Following a challenging several months after a string of plant suicides, manufacturing company Foxconn is poised to capture more than half of the market share in its industry.
Foxconn, which makes the iPhone and iPad among other devices, can thank the phenomenal growth of Apple for helping to boost its revenue and market share, according to a report released Tuesday by iSuppli.
The Taiwan manufacturer, part of Hon Hai Precision Industries, is set to capture more than 50 percent of the global sales in the EMS (electronics manufacturing services) market by 2011, up from 44.2 percent last year. EMS providers make electronic products on contracts outsourced from OEMs (original equipment manufacturers).
"Foxconn's customers are some of the hottest companies in the electronics business today, most notably Apple," Thomas Dinges, an iSuppli associate, said in a statement. "As Apple and others have gained share, so has Foxconn."
Though Foxconn makes products for Hewlett-Packard, Dell, Sony, and Nokia, Apple is its fastest-growing customer, according to iSuppli. Apple just last week raised production targets for the iPad to its Asian providers, a move that could help it ship as many as 12.9 million iPads around the world this year and 36.5 million next year. Global shipments of the iPhone are forecast to reach 53.5 million next year, more than double the 25.1 million shipped in 2009, iSuppli said.
To help reach those new production targets, Apple is also boosting its spending on semiconductors. By next year, the company will become the world's second-largest buyer of semiconductor chips, both directly and indirectly through providers such as Foxconn.
The only problem area for Foxconn is the performance of its gross margins, which fell 8.7 percent in the first quarter from 9.5 percent a year ago.
"Margins are a key area for Hon Hai, as the company is working to implement higher wage rates in its large facilities in China, while shifting production over the next several quarters to lower-cost regions in that country," Dinges said.
Those wage increases have been driven by the intense scrutiny and controversy that surrounded Foxconn after a rash of suicides at its plant in Shenzhen, China, a few months ago. The suicides prompted key customers such as Apple, HP, and Dell to announce that they would open their own investigations into factory conditions.