Hon Hai Says IPad Production Advances to Start Paying Off in Second Half

Hon Hai Precision Industry Co. Chairman Terry Gou said steps to more efficiently make Apple Inc. (AAPL) products including the iPad will start to pay off in the second half of this year and next year.

The contract electronics assembler’s profit gains have lagged behind those of Apple because the devices are “very difficult to make,” Gou said today at Taipei-based Hon Hai’s annual shareholders meeting. The company is continuously learning ways to make the products more efficiently, he said.

Hon Hai, the Foxconn Technology Group’s flagship, posted two quarters of declining profit on higher wages and costs for moving factories to inland China. Gou, who founded the company in 1974, in September cut his long-term annual sales growth forecast in half to 15 percent from this year, after revenue surpassed that of the company’s largest clients.

“We’ve helped Apple make a lot of money,” Gou said. “If our customers make money, then we can also make money. I most fear customers that don’t make money.”

Hon Hai’s net income rose 1.9 percent to NT$77 billion ($2.7 billion) in the year ended in December on a 53 percent jump in revenue to NT$3 trillion. Apple’s profit jumped 70 percent to $14 billion in the year ended in September.

Shares Gain

The shares gained after shareholders approved a plan to pay a dividend of NT$2 on 2010 earnings, more than initially proposed. The stock rose 0.5 percent to close at NT$100.50 in Taipei trading, after gaining as much as 1.5 percent to NT$101.50.

Hon Hai plans to pay a NT$1 a share cash dividend plus NT$1 in stock on 2010 profit, matching the previous year. The board earlier proposed a dividend of NT$1 per share in cash, and NT$0.50 in stock.

Shareholders also endorsed a proposal to sell as many as 1 billion shares that may be issued in the form of global depositary receipts. Hon Hai has no immediate plans to sell the stock, Chief Financial Officer Huang Chiu-lian said in an interview before the meeting. The board will consider market conditions including its share price before it makes an issuance, she said.

Hon Hai and Sharp Corp., Japan’s largest display maker, recently held further talks on cooperation between the two companies for flat panels, with no agreement yet signed, Huang said today on the sidelines of the shareholders meeting.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.