10 March 2009]
The losses posted by the EMS firm Foxconn International Holdings (FIH), the Hong Kong-listed handset subsidiary of Foxconn Electronics (Hon Hai Precision Industry), for the second half of 2008 indicates that the latest global slowdown has also taken tolls from the EMS sector.
FIH has posted an after-tax loss of US$20.86 million for the second half of 2008, compared to a net profit of US$143 million for the first half. For all of 2008, FIH's net earnings tumbled 83.2% from a year earlier to US$121 million, according to company data.
The advantage of vertical integration and global deployment once enjoyed by EMS firms has now become heavy burdens amid the economic downturn, weighing down their competitiveness, observers with Taiwan handset industry commented.
The vertical integration had long been an advantage for FIH for the purchases of handset parts and components. However, a lack of flexibility for the procurements of needed parts from outside suppliers has prevented FIH from lowering its production costs recently, said the observers.
The large production bases FIH runs in Europe, Asia, and Latin America have also weighted down the company due to lower capacity utilization rates as handset customers reduced sharply their orders under the economic storm, added the observers.
On the other hand, ODM makers have recently strengthened their competitiveness in battles for orders with EMS rivals, leveraging their flexibility in production and design capability, said the observers.
Of course, FIH did not stay idle for long. The company has taken several measures addressing the problems it faces. It has poured more resources to strengthen its ODM capability for the production of smartphones, which will probably include Android-powered phones in addition to current Windows Mobile- and Palm Web-enabled models.
The company has also said that it will continue to consolidate its global production capacity by moving plants to inner China and India where overall production costs are lower.
