Foxconn’s Gou to Tap Smart Manufacturing in Move Beyond Labor

Terry Gou
Hon Hai Precision Industry Co. chairman Terry Gou. Photographer: Tomohiro Ohsumi/Bloomberg

Foxconn Technology Group plans to introduce more automation, cloud computing and services to drive long-term growth at the maker of Apple Inc. iPhones and iPads.

“I’m very confident of the medium and long-term future,” Chairman Terry Gou told investors Thursday at the annual meeting of Hon Hai Precision Industry Co., the largest member of Foxconn. While the company will face challenges in the second half of the year, 2015 will be as good as last year, he said.

Hon Hai, which gets half its sales from Apple, posted record profit last year by using more automation and improved production efficiency, even as revenue missed Gou’s own forecast. Deals with SoftBank Corp. and Alibaba Group Holding Ltd. are part of Foxconn’s plans to invest more in big data, automation and renewable energy.

Foxconn is investing in so-called Industry 4.0 systems that use data analysis, Internet of Things and automation to develop smart manufacturing processes, Gou said. Those moves will help boost profit with less emphasis on revenue growth.

Big data is the process of collecting and analyzing large amounts of information to allow organizations to improve efficiency or target customers. Internet of Things refers to devices such as temperature sensors, air monitors and refrigerators that connect to networks.

Those initiatives as well as cooperation with partners in India and China to move deeper into e-commerce, software and services will start to pay off next year. The company expects to manufacture display modules in India in the future, he said.

Future Services

Foxconn, founded by Gou 41 years ago, also plans to develop supply-chain services with future growth to come from services and not manufacturing, he said.

The company will allocate 20 percent of its resources to help develop entrepreneurs with incubation centers to be set up in Europe, Japan and the U.S., adding to those already in Taiwan, he said.

Hon Hai, the largest assembler of iPhones, posted a 6.6 percent increase in sales last year, missing Gou’s own guarantee made at last year’s annual shareholders’ meeting that both revenue and profit would climb at least 10 percent for the year. Net income advanced 22 percent, the most in five years as it trimmed costs and boosted efficiency.

Revenue this year is expected to rise 5.6 percent and net income 7.2 percent, according to the average of analyst estimates compiled by Bloomberg.

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