Hon Hai Looks Toward Indonesia’s Promising Economy As Apple’s Growth Slows

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Hon Hai is planning to diversify its business away from producing Apple devices by signing an agreement with Indonesia to make and sell handsets in that country, reports Reuters.

A Hon Hai spokesman said that the company, which derives about 60 to 70 percent of its revenue from manufacturing work for Apple, hopes to sign the agreement next month. Hon Hai, the parent company of Foxconn, is one of Apple’s largest suppliers.

The Taiwanese company joins other manufacturers looking to make their business less dependent on Apple contracts as the Cupertino company’s growth slows. Earlier this month, Hon Hai reported a decrease of 19 percent in 1Q sales, due in large part to falling demand for iPhones. Another heavily Apple-dependent manufacturer, Cirrus Logic, has said that it is trying to diversify its customer base and is now shipping to several mobile phone manufacturers. Fellow Apple chip maker SK Hynix may start selling to Samsung, a deal that could help the Korean tech giant avoid supply disruptions for its Galaxy S4 smartphone, a key iPhone rival.

Hon Hai spokesman Simon Hsing told Reuters that the company is currently in talks with several Indonesian phone companies and will finalize the details of its investment and partnership agreements after securing a memorandum of understanding (MOU) with the government.

Indonesian Trade Minister Gita Wirjawan has previously stated that Hon Hai’s investment would be between $5 billion and $10 billion, and that it would build a factory near Jakarta to assemble 3 million handsets a year. Hon Hai won’t export phones from Indonesia or manufacture Apple products there. Instead, it will make devices for local brands and sell them domestically.

Latching onto Indonesia is a savvy move for Hon Hai because the nation’s growing economy will be driven in large part by the tech industry. Hsing said that the phone market in Indonesia is worth $2.4 billion. According to a recent IDC report, IT spending in Indonesia is forecasted to reach $15.8 billion this year. Furthermore, up to 70 percent of Indonesia’s population is working age–in other words, they are the people who will drive spending on consumer tech.