| TAIPEI/HONG KONG
TAIPEI/HONG KONG Aug 14 Foxconn Technology
Group, best known for assembling Apple Inc'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 Ltd, 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 also held talks with the southwestern 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."
Hon Hai has not disclosed its investment in solar, which
analysts reckon is small, but with $22.7 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 percent of Hon Hai revenue that
exceeded $100 billion last year. It reported a second-quarter
net profit of T$16.98 billion ($567.15 million) on Tuesday, up
35 percent from a year earlier and exceeding analysts'
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.
"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," said Jason Huang, a Shanghai-based
solar analyst with Taiwan-based consultancy TrendForce.
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.
The longer-term future depends largely on whether China can
boost domestic demand and Japan keeps buying solar panels to
help offset the loss of nuclear power shut off after the
Fukushima Daiichi nuclear disaster in 2011.
Foxconn first indicated its interest in expanding its solar
presence in 2011, when it signed a preliminary deal with top
Chinese solar silicon producer GCL-Poly Energy Holdings Ltd
to set up solar-related ventures in northern China.
But they have made no headway.
GCL-Poly declined to comment.
In March, the Guangxi government said it would work with
Foxconn on a plan to expand the firm's businesses in the
province, including a proposal to build five solar equipment
plants and 20 solar farms. The announcement, posted on the
ministry's Web site, gave no details.
Zhu Hanwen, an official at the Commerce Ministry's branch in
Guangxi, told Reuters that Foxconn was still negotiating with
the local government on the proposed solar projects but "no
projects have been launched yet".
Foxconn's Hsing confirmed that the company had not signed
any contracts with the Guangxi government on solar investment.
If Foxconn makes a big foray into solar manufacturing, it
may become a formidable industry player, thanks in part to its
Foxconn has come under fire in recent years for working
conditions in its factories in China, which employ 1.2 million
people to mass produce electronics components and gadgets such
as iPads and iPhones.
Its enigmatic founder and chairman Terry Gou, in the wake of
a series of suicides among young workers at Foxconn China
factories in the last few years, has talked about plans to put a
million robots in its factories. It has also been moving its
China factories inland, including Guangxi, in search of lower
labour costs as wages soar in coastal cities.
And with a global footprint that far surpasses other
industry players, Foxconn has the potential to embed itself as
deeply in the worldwide solar supply chain as it has in
smartphones and computers. As trade disputes continue to keep
the sector on high alert, Foxconn can take advantage of the
massive scale to shift production elsewhere and sidestep export
restrictions and tariffs.
It could also play a role as a panel contractor rather than
launch products under its own brand.
Fox Energy signed a deal in April to manufacture up to 350
MW of solar modules at a plant in Mexico for SunEdison Inc
, a solar services provider controlled by MEMC
Electronic Materials Inc, according to a statement on the U.S.
company's website, which Foxconn confirmed.