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Foxconn Chairman Terry Gou Cuts Growth Target as Size Brings

September 5, 2010

  Foxconn Chairman Terry Gou Cuts Growth Target as Size Brings ‘Biggest
  Challenge’ – Bloomberg Businessweek

World’s Largest Contract Manufacturer of Electronics Cuts Target in Half as
Demand for Apple iPhones and iPads Fail to Offset Slowing Computer Sales

Business Wire

NEW YORK -- September 05, 2010

Foxconn Technology Group Chairman Terry Gou cut his long-term growth target
for the world’s largest contract manufacturer of electronics by half as demand
for Apple Inc. iPhones and iPads fails to offset slowing computer sales.

Gou, who founded the Taiwanese company in 1974, will tell managers that he’s
lowering Foxconn’s annual sales growth target to 15 percent from the 30
percent fixture set for more than a decade, the chairman said.

“How many companies have grown this big and still grow 30 percent?” Gou, 59,
said in an interview at his office in Shenzhen, China yesterday for Bloomberg
Businessweek’s upcoming issue (on newsstands Friday, Sept. 10). “Fifteen
percent is also big.”

The reduced target, like the spate of suicides that’s kept him in Shenzhen
since May, may underscore the challenges of managing a business that generates
more sales than Apple or Dell Inc., and employs almost 1 million workers.
Taiwan’s richest man is planning to expand production in the U.S. and enter
fields such as biotechnology to sustain growth.

“I don’t think investors are ready to hear news of such a big cut in the
growth target,” said Vincent Chen, who rates shares of Foxconn’s flagship Hon
Hai Precision Industry Co. unit “hold” at Yuanta Securities Co. in Taipei.
“These problems, including lower market growth, are giving Gou the biggest
challenge he’s ever faced.”

The full story is online at:

Underperforming Stock

Hon Hai has fallen 18 percent in Taipei trading this year, underperforming the
island’s Taiex Index, after the deaths of at least 10 workers led Gou to raise
wages and accelerate factory relocation plans in China. The stock’s tripled
this decade, giving Hon Hai a larger market value than electronics companies
such as Sony Corp. or Panasonic Corp.

Worldwide growth in shipments of computers, Foxconn’s main business, will slow
to 12 percent in 2011 from 18 percent this year, according to estimates at
Taipei-based Capital Securities Corp.

Gou, who’s run Foxconn since its founding, said he has a succession plan that
may be announced in three years. He plans to keep his job until his 1-year-old
daughter gets married, he said.

Gou said he expects sales to meet the 30 percent growth target this year as
customers recover from the global recession. Revenue at Hon Hai Precision
Industry Co., Taipei-based Foxconn’s flagship unit, will increase 39 percent
to NT$2.72 trillion ($85 billion), according to the average of 18 analyst
estimates compiled by Bloomberg.

Bigger Than Apple, Dell

Those sales would trump those of Gou’s customers. Analysts forecast $63
billion for Apple, $62 billion for computer-maker Dell and the $54 billion for
mobile-phone producer Nokia Oyj, according to average estimates compiled by

Gou is considering biotechnology companies as acquisition targets, though
he’ll slow Foxconn’s pace of purchases, he said, declining to identify any
company names. Foxconn is also planning to expand in industries such as
nanotechnology and media content, he said.

Still, Foxconn plans to drive growth mainly through internal expansion after
overpaying for some acquisitions, he said.

“If I merge or acquire, I will be more conservative in what I need and what I
really get from it,” Gou said. “On one company, I spent too much money to
acquire it, then realized my internal knowledge is better than their internal

More coverage of Foxconn will appear in the upcoming issue of Bloomberg
Businessweek, on newsstands Friday, Sept. 10, 2010.


Bloomberg Businessweek
Heather Carpenter, +1.212.617.1661
Bloomberg News
Ty Trippet, +1.212.617.2443