Foxconn has been moving its China factories inland in search of lower labour costs as wages soar in coastal cities. Photo: Reuters
Foxconn Technology Group, best known for assembling Apple's iPhones, will decide by year-end whether to branch off into unconventional new territory: making solar panels in China.
It is an industry plagued by overcapacity that outstrips demand, and panel prices have tumbled by more than two-thirds in the past two years. Yet some analysts say Foxconn may end up timing it right, ready to make a move just as the sector shows some signs of stabilising.
Foxconn, the trading name of Taiwan's Hon Hai Precision Industry Co, has been testing the market for two years, but has revealed little about its Fox Energy solar unit. The company has one small solar panel factory in eastern China and has held talks with the south-western province of Guangxi about building solar power plants.
"We aim to make a decision about whether or not we will enter this market by the end of this year," Foxconn spokesman Simon Hsing told Reuters. "We believe renewable energy is a potentially good trend. It looks like a good project. This is an industry we probably need to know more about."
SEEKING TO CUT RELIANCE ON APPLE
Hon Hai has not disclosed its investment in solar, which analysts reckon is small, but with $US22.7 billion ($24.94 billion) in cash on the balance sheet as of March, it has the wherewithal to expand.
The company is seeking to cut its reliance on Apple, which accounted for an estimated 60 per cent of Hon Hai revenue that exceeded $US100 billion last year. It reported a second-quarter net profit of T$16.98 billion ($623.17 million) on Tuesday, up 35 per cent from a year earlier and exceeding analysts' expectations.
The same strengths that have served Foxconn well with Apple - assembly efficiency, cost-control expertise and an international footprint - may also help it succeed in solar.
Jason Huang, a Shanghai-based solar analyst with Taiwan-based consultancy TrendForce, said: "Based on my recent contacts with several officials at Foxconn, they are still examining the industry to see whether the market still suits them, whether the market will become big enough for them to get in."
Solar panel demand fell sharply after the 2008 global financial crisis, which forced many governments to slash subsidies for solar power. The solar industry is still grappling with severe overcapacity, with China alone boasting an annual capacity of 55 gigawatts (GW) versus total global demand of 35 GW estimated for this year.
But market conditions have brightened recently. Chinese solar panel makers such as LDK Solar, Suntech and Trina Solar have been helped by an agreement between Beijing and Brussels last month, which averted what could have been a crushing trade war.
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