Taking the ‘Conn’ out of Foxconn

by Matt Klassen on June 27, 2013

Amidst a downturn in a stagnating technological economy where even the once stalwart Apple is struggling, manufacturing giant Hon Hai, and its most infamous subsidiary Foxconn, has put its spin doctor’s back to work, this time not in an effort to cover up some worker related atrocity, but to convince the world it will be unaffected by the slowing market.

In a statement at the company’s annual meeting yesterday in Taipei, company CEO Terry Gou promised consistent growth, stating “I guarantee profit this year will surpass last year’s,” while avoiding any specific earnings numbers. This guarantee comes as Foxconn faces probably the most challenging production year in quite some time, with analysts predicting the company’s most successful client, Apple, will see its first profit drop in five years, as interest in the iPhone and iPad continue to wane.

But where everyone else is struggling, Gou is over confident that his company will continue to grow by “increasing production efficiency,” by investing in burgeoning technologies, and spinning off its connector division, effectively taking the ‘conn’ out of Foxconn.

For several years now a major part of Foxconn’s business has been making connectors and cables for the PC industry, giving birth to the Foxconn name. But as the PC market has slowed these last several years, the ‘conn’ in Foxconn has started to weigh the company down, a drain on Hon Hai’s otherwise thriving manufacturing empire.

With the news that Foxconn will be spinning off its connector division, one has to wonder if the subsidiary will continue to exist as it currently does, or if its parent company Hon Hai will explore a relevant name change reflecting the company’s current strengths (is Human Gristmill taken?).

Beyond this, Gou’s certainty regarding his company’s forthcoming growth seems to be a case of equal parts overconfidence and naivety, as even if the company does undertake a process of streamlining operations and investing in new manufacturing technologies, change comes to big business as maneuvering comes to an ocean liner, slowly and laboriously.

But for a company whose entire public persona is built on the promise of strong revenues—often at the expense of human dignity, respect, and sometimes even lives—its clear some bravado was necessary, particularly as analyst predictions disagree with Gou’s bold claims.

As Bloomberg reports, “Net income will fall to NT$92.8 billion ($3.1 billion) in 2013 from NT$94.8 billion a year earlier, according to the average of 23 analyst estimates,” meaning that Gou’s claims are likely nothing more than tripe, designed solely to dupe simpleminded shareholders into believing nothing can effect this manufacturing behemoth.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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