Tag Archives: Foxconn

The Rush to Russia

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Timing is everything, isn’t it?

On the same day IPC named an official representative for Russia, calling it “a market with enormous growth potential,” a leading research firm basically threw in the towel on Putinland.

“Russia now is facing a cessation of new investment, along with shutdowns in existing facilities and delays in new ones,” iSuppli said in a press release today. The firm pointed to aborted attempts by Foxconn, Flextronics and others in trying to get operations there up and running, and noted that while Elcoteq has been building in the country for years, its investment there has been so unprofitable, the telecom EMS tried in vain to find someone to dump it on and finally decided to shut it down.

In its announcement of Yury Kovalevsky as its official representative to Russia and Russian-speaking countries, IPC said the appointment is part of a “long-term plan to expand services and standards globally.” Kovalevsky, IPC said, will make IPC services “widely available to companies in Russia, a market with enormous growth potential for both electronics manufacturing services and printed board production.”

That comes as news to iSuppli.

I’m not saying one side is right and the other is wrong. By outsourcing translations and distribution of its standards, IPC can position itself to make money even if the market doesn’t materialize any time soon.

But it’s hard to escape iSuppli prinicipal analyst Adam Pick’s damning statement: “With the ongoing recession and financial crisis, however, it appears that most of the interest in penetrating the Russian market has disappeared. Furthermore, the historical record for electronics manufacturers operating in Russia has been plagued by multiple problems.”

Pick ticks off a series of reasons: the Russian economy; social and political issues; tariffs and value-added taxes; shifting policies and laws; slow material supply chains and a lack of electronics supply chain infrastructure; inefficient distribution; Russian mobs; counterfeiting rates so high it would make the Chinese blush.

On the other hand, in market terms, IPC is probably buying low. Like I said, timing is everything, right?

Relisted

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Research firm iSuppli’s Top 10 Global EMS firms list, which came out today, differs in several respects from Circuits Assembly’s findings.

Why? It may be that the iSuppli data for Foxconn take into account non-EMS related sales (the company also produces bare boards and connectors, among other things). Even so, Foxconn itself last week reported 2008 revenues of $42.3 billion.

iSuppli also excludes Cal-Comp Electronics/Kinpo Electronics from its list, despite that company’s contract manufacturing revenues of $3.2 billion last year, which would place it seventh overall.

Finally, iSuppli includes Universal Scientific in its ranking, although the Taiwanese company reports EMS sales of just $490 million in 2008.

Just Say No, IBM!

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Over the years, OEM after OEM has fallen prey to Foxconn, lured by the temptation of higher margins by outsourcing product to the Taiwanese ODM. H-P, Motorola, Dell, Sony and Apple are among the many, many companies that outsource billions of dollars worth of product build each year.

Sadly, IBM, one of the few remaining major holdouts, appears on the brink of ending its streak. Big Blue is set to announce a deal to to codevelop something called “environment-friendly” products.

Pending release of financial terms, it’s unclear what IBM stands to gain from the program.

IBM has ventured down the environmentally friendly path before. In 2007, it committed $1 billion to fund Project Big Green, an effort toward environment-friendly, energy-efficient products and services. This is its first known deal with Foxconn, however.

It shouldn’t happen.

As The Economist pointed out earlier this month, China’s reputation for workmanship remains a negative in consumers’ eyes. “The poor external reputation of China’s products hurts not only Chinese companies but also Western firms known to be selling Chinese-made goods.” Citing last year’s scandals over various Chinese-produced toys, the US and India have passed new laws governing imports from the World’s Workshop.

And myriad stories have cited Foxconn’s dismal and imperialist working conditions.

IBM is America’s crown jewel, the greatest electronics company the world has ever known. Getting in bed with scofflaws like Hon Hai cheapens its luster and diminishes its reputation. IBM should walk away.

UPDATE: Whew! That wasn’t so bad. The Wall Street Journal is reporting Foxconn is licensing IBM’s GreenCert technology for estimating the amount of greenhouse gas emissions pumped from factories. It could have been much worse.

Plexus Delivers, Again

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Plexus this week reported December quarter revenues were flat with last year’s, which for this market counts as a huge win, as most top tier EMS firms saw revenues drop 3% or more. The world’s 10th largest EMS company also turned a net profit, making it a rarity among its large publicly traded competitors.

It’s a testament to the company’s wisdom years ago when it decided to forego chasing revenues in favor of concentrating on the higher margin medical, military and aerospace markets. That foresight, coupled with solid execution, has put Plexus at the forefront of its peer group.

All of which justifies Circuits Assembly’s selection of Plexus as its 2008 EMS Company of the Year.

As markets turn down, EMS companies historically reach for any piece of business they can get to keep factories full. This means new competition. This week, for example, Flextronics chief executive Mike McNamara said the company is “very bullish” on the medical end-market, adding “more and more outsourcing opportunities are coming out of this environment. And it is an industry that is very reasonably new in terms of outsourcing. We think that is a big upside.”

Things aren’t going to get easier in Neenah. But we think the company remains the best-positioned to survive this cold winter.

Gou’s Big Con

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Credit the Wall Street Journal for determination. The paper finally landed — after five years of trying — an interview with Hon Hai chairman Terry Gou. The piece (click here for the link) takes readers inside the Foxconn fortress (aka its Shenzhen plant, a one-square mile walled city which employs 270,000 workers).

Even for those of us who lived through Enron, it’s hard not to come away disgusted. ” ‘I always tell employees: The group’s benefit is more important than your personal benefit,’ ” the Journal quotes Gou as saying.

A typical mid-level assembly-line worker earns about $230 a month, including overtime pay. The chairman’s net worth: $10 billion. Apparently “Gou” translates to “group.”