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China Briefings

Reports on China issued by Samsung Economic Research Institute

Hon Hai: A Hidden Giant in the IT Industry

Hon Hai: A Hidden Giant in the IT Industry

JANG Sung-Won

June 13, 2012

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Taiwanese company Hon Hai became the largest shareholder of Japan's electronics giant Sharp in March 2012. After jumping into the electrical manufacturing service (EMS) market in earnest in 2001, Hon Hai has become the world's largest EMS provider since 2004. By 2011, the company grossed US$92 billion in sales revenue, and accumulated around 600 subsidiaries and one million employees. Hon Hai's high-profile customers include Hewlett-Packard (HP), Nokia, Sony and Apple who has significantly contributed to the EMS provider's consistent growth.

Hon Hai has three growth strategies. First, it has encouraged IT companies to become customers by aggressively acquiring their factories which have either lost competitiveness or become obsolete. Second, it has strengthened competitiveness by maximizing its manufacturing capabilities (e.g. producing key parts in-house, strengthening design capabilities). Third, it has acquired new growth engines by continuously expanding business areas, manufacturing high-tech parts with high added value instead of simply manufacturing low-tech parts.

Korean companies must pay attention to Hon Hai's growth and strategies as the Taiwanese EMS provider could soon acquire Japanese companies' manufacturing facilities and technologies, which will pose a threat. Furthermore, Hon Hai should not be considered as a mere supplier but rather a competitor. Attention must be paid to the company's investment plan and strategies, and more efforts should be made to secure price competitiveness in terms of high value-added products as well as low value-added products.

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