TAIWAN: Hon Hai starts selling its own TV sets
Hon Hai, best-known as the contract manufacturer behind products for Apple, Sony and many other consumer electronics brand, has branched out into selling its own TVs.
And that could cause shudders for the Japanese companies it supplies, including Sharp and Sony.
Its first model, a £1250 60in LED-lit LCD (above) sold under the RadioShack brand – HonHai operates RadioShack shops as a joint venture in China – sold out in a couple of hours when it went on sale in Taiwan a couple of weeks ago.
Now the company is considering expanding the range with a 70in TV due in April, and plans to ship up to 150,000 sets this year. The sets use LED-lit LCD panels sourced from the Sakai plant in Japan, which Hon Hai runs jointly with its previous sole owner, Sharp.
The move comes as reports suggest major Hon Hai client Apple, whose contract is thought to account for up to half of the company's sales, is scaling back orders for production of its iPhone 5 smartphone.
Meanwhile Hon Hai is feeling the pinch of rising Chinese labour costs and tighter procurement policies on the part of the companies it supplies.
Wages at its huge Foxconn factories in Shezhen, China, have tripled in the past decade, and with a workforce estimated at some 1.25m, that's a major consideration.
It's already led to the company greatly increasing the amount of automation used in its production facilities.
As a result of these increased costs, the Taiwan-based company is looking for ways of increasing profitability – and making TVs for its own brand, and selling them through its own stores, is an obvious route.
It originally started selling the TVs back in November last year in conjunction with a Taiwanese ISP and a multimedia services company, offering them at NT$38,800 (£835) to consumers signing up for a two- or three-year contract for multimedia content at NT$359 (£7.75) a month.
The company expected orders of around 2000 sets per month, but that has already risen to 10,000/mth, according to Taiwanese reports.
At the end of December Hon Hai started offering the TV 'contract free' at NT$58,800 (£1250) through Yahoo!Kimo, and the initial stocks of 500 units were cleared within a couple of hours.
Now the company has expanded availability to its CyberMart shops (above) and its Cyber 3C online retailing portal in Taiwan, and is launching them in China through the shops CyberMart runs with US retailer RadioShack (below), where the sets will probably retain the RadioShack branding.
And while plans for 120,000-150,000 sales this year may seem like baby steps for now, Hon Hai is clearly thinking big: it has 40 CyberMart shops in Taiwan and China at the moment, but aims to double that number this year, while its jointly-run RadioShack shops venture in China (below) has a target of 5000 outlets, the plan being to attract consumers by selling Hon Hai-made 'house branded' products.
That kind of expansion, and the keenness of Hon Hai to do deals to sell its own goods in ever-increasing numbers of outlets, could possibly threaten the sales of some of the company's major Japanese clients, including Sharp and Sony, already starting to feel the threat of the rise of the major Chinese TV brands.