Hon Hai to Move Connector Production Lines Back to Taiwan

Taipei, June 25, 2008 (CENS)--To cope with growing labor costs in China, Taiwan-based Hon Hai Precision Industry Co., Ltd., a world-level electronics supplier on an EMS (electronics manufacturing service) basis, has decided to move three connector production lines back to the island from China, according to company sources.

Despite lackluster sales in the first quarter of this year, which were caused partly by appreciation of New Taiwan dollars and rising labor costs in China, Terry Guo, chairman of Hon Hai Group, is still confident that the group's business operations would keep growing this year. The group has recently been automating production, so far having built three new lines in Taiwan this year, to apparently improve operating efficiency.

Responding to Dell's decision to lay off 10% of its workforce or 8,800 persons in the next three years worldwide and to shut down its factory in Texas, Hon Hai Group has been trying to have Dell, its major client, certify its two existing plants in Mexico and China, hoping to turn the two factories into specialized distributing bases for Dell.

Traditionally, Dell classifies its contract suppliers into 10 grades according to types of shipment. However, being a direct seller, Dell assembles, packages and markets finished products independently, hence only few of its contract suppliers are classified as grade 10.

Contract suppliers certified by Dell as grade 10 can assemble finished products independently for direct delivery to Dell agents or distribution channels. In fact Hon Hai Group's Mexico plant is a Dell certified grade 10 factory.