In a heated discussion, Terry Gou, world’s 136th billionaire, more known as the Founder and Chairman of Hon Hai Precision Industry Co. stated that Hon Hai, parent company of Foxconn International Holdings – will split into multiple business units in order to ensure profitability in the future.
Hon Hai is an international manufacturing conglomerate that employs almost a million people (at the end of 2010, the count stood at 920,000 employees) and the chances are that there is no household in developed world that doesn’t use at least one product manufactured by Hon Hai/Foxconn.
In his speech, Terry Gou stated that the company will pay out a dividend of NT$2 (7 U.S. Cents), as requested from stock holders. The company recorded earnings of NT$7 per share (24 Cents), and originally Hon Hai was supposed to pay out just NT$1 (3 cents) per share. Mr. Gou said that he views 2011 as "the year Hon Hai strenghtens its foundations. 2012 will be the year of harvest for Hon Hai."
Furthermore, the company is starting its diversification by spinning off its touch screen and digital camera module manufacturing businesses. New business units will be wholly owned Hon Hai subsidiaries, but will have separate lines of management in order to ensure higher efficiency and more aggressive approach.
Managing 920,000 people company lead to a lot of slowness in the management chain, and Terry Gou wants to shake up the ranks. This comes as a consequence of business trends in the past couple of years, which saw Foxconn’s revenues growing to 59.3 billion U.S. Dollars, but with a profit of only 2.2 billion USD, as the gross margin dropped from 9.5% to only 8.15%. Contracting business dropped to single-digit profit margin in the wake of global recession and it is not showing signs of recovery, while at the same time manufacturing complexity is increasing dramatically, especially with the rise of SOC applications (System-on-Chip).
All in all, expect many more shakeups coming out of Hon Hai, which is guaranteed to make pressure on its clients such as Apple (i-devices), Amazon (Kindle), ASUS (Notebooks, Desktops), Intel (Motherboards, Server chassis, power supplies), Cisco (Routers), HP (Notebooks, Servers, Motherboards), Dell (Notebooks, Desktops, Servers), Nintendo (Wii Console), Microsoft (Peripherals, Xbox 360 console), Sony Ericsson (dumbphones, some smartphones) and many more…