Amid reports of cost-cutting, Hon Hai says it will raise R&D spending

Taipei, Taiwan-based Hon Hai Precision Industry Co., the world's largest contract electronics maker, said Thursday that it is committed to increasing its spending on research and development of new technology.

Responding to a Bloomberg report about plans to reduce costs substantially in 2019 amid falling global demand, Hon Hai said it is reviewing its spending for next year but will not cut back on R&D funding.

"Hon Hai is building on its efforts over the past 40 years to develop core manufacturing technology and is exploring the field of industrial Internet at the moment," the company said in a statement.

It said its long term efforts in industrial Internet development, big data, artificial intelligence and production automation have paid off for the Hon Hai group.

Hon Hai, known as Foxconn in the global market, said it will "boost R&D spending in a bid to develop new technology and innovative products."

The R&D funding will be allocated based on the group's worldwide investments and the specific needs at certain production sites as part of a global expansion effort, said Hon Hai, which assembles iPhones for Apple Inc.

In its statement, Hon Hai said it is working toward transforming its operations, which includes its normal annual review of its spending plans and allocation of resources.

The latest cost review is focused mainly on divisions and subsidiaries that have not been meeting their operation and profit targets, the company said, adding that its R&D operations are not part of that review.

According to the Bloomberg report, Hon Hai is "the latest Apple Inc. supplier to warn of anemic demand." Citing an internal Hon Hai memo, the report said the Taiwanese manufacturing giant is planning to cut costs by 20 billion Chinese yuan (US$2.88 billion) next year to almost half of its current annual spending, due to expected stiff competition.

The report said Hon Hai is aiming to reduce spending on its iPhone assembly operations by 6 billion Chinese yuan in 2019 and cut its non-technical workforce by 10 percent.

Hon Hai currently runs a broad production base in China, hiring about 1 million workers there to manufacture gadgets for Apple and other international brands.

Hon Hai said it remains upbeat about the outlook for the global economy as it believes the United States and China will resolve their trade disputes.

In Taiwan, stocks of Hon Hai and other Apple suppliers have come under pressure in recent trading sessions amid rising concern over slower-than-expected sales of the three latest iPhones.

On Friday morning, shares of Hon Hai were up 1.01 percent at NT$70.20 (US$2.27) on the Taiwan Stock Exchange, while the benchmark weighted index had dropped 0.26 percent to 9,689.82 as of 11:57 a.m.

Source: Focus Taiwan News Channel