Hon Hai opens handset assembly facility in Tianjin, China

Taipei, July 6, 2005 (CENS)--Hon Hai Precision Industry Co., Ltd., currently Taiwan's largest independent manufacturing conglomerate by revenue, recently announced its investment in a mobile-phone assembly factory in the mainland Chinese port city of Tianjin for US$19.8 million.

The company stressed the facility is designed to serve local customers in the mainland. Some institutional investors believe Motorola will be the major customer the planned factory will serve. Investment capital will land on the construction project through Hon Hai's Hong Kong affiliate, Foxconn International Holdings Ltd. (FIH).

Taiwanese industry insiders forecast the investment plan to pose a serious threat to Taiwan's suppliers already contracted by Motorola considering the Hon Hai-owned factory would lure Motorola orders away from them.

Motorola opened a factory in Tianjin in 1992 to assemble its mobile phones for sales not only in the mainland but also elsewhere in the world. Two years later, the factory branched into production of batteries and rechargers for mobile phones. The Motorola factory has outsourced as much as US$11.2 billion worth of products from local suppliers in each of the past few years.

Taiwan's industry watchers point out that Hon Hai and Motorola have worked together closer and closer since Hon Hai acquired a Motorola factory in Mexico two years ago. They think the two companies' Tianjin factories will eventually enter into alliance. Some of them even expect Hon Hai to acquire the Motorola factory. But Hon Hai has denied the reports.

Industry insiders in Taiwan estimate FIH to likely ship up to 50 million handsets a year once Motorola's Tianjin factory begins to work with Hon Hai's Tianjin factory.

Put aside the handset-assembly investment project, Hon Hai also announced a plan to open a US$5.16 million factory in Kunshan of mainland China through affiliate Foxconn (Far East) Ltd. Of Hong Kong to make computer connectors.