Staff at work on the production line at the Foxconn complex in Shenzhen. Because of increased labor costs, the company recorded its biggest drop in profit in two years in the first quarter. [Photo/Provided to China Daily]SHANGHAI - Foxconn Technology Group, the world's largest electronics contractor by revenue, has halted a plan to manufacture tablet computers in Hengyang in Central China's Hunan province.
That's according to a statement from Foxconn's parent company, the Taipei-based Hon Hai Precision Industry Co Ltd, to the Taiwan Stock Exchange on Tuesday.
The announcement came as Foxconn- the contract maker of Apple Inc iPhones and Hewlett-Packard Co computers - was reported by the Xiaoxiang Morning Herald to be planning to make its Hengyang tablet computer plant operational by the end of May.
In the statement, Edmund Ding, a Foxconn spokesman, said that the company has terminated an investment proposal to manufacture children's e-books and digital photo frames in Hengyang due to "subjective and objective environmental changes", despite previous investigations into its feasibility.
A notice posted on the website of the Taiwan Stock Exchange on Tuesday added that investment plans submitted on the Chinese mainland are in accordance with the relevant laws and regulations, and that investors should be cautious when assessing media coverage.
A report in the Xiaoxiang Morning Herald on May 1 said the Hengyang plant was expected to produce 10 million tablet computers this year, and to have an annual output value of 20 billion yuan ($3.1 billion). According to people familiar with the matter, that figure was expected to hit 150 billion yuan in three years, with 80 percent of the products slated for export to foreign countries.
A media officer from Hengyang's Baisha Industrial Park acknowledged the statement from Foxconn and confirmed there are ongoing coordination issues related to the matter. He refused to comment further.
Calls to Foxconn's office in Shenzhen on Thursday went unanswered.
As part of its strategy to move production from the coastal city of Shenzhen to inland areas, Foxconn signed an agreement with the Hunan provincial government in December to establish manufacturing and research centers in Hengyang and Changsha, the capital city of the province.
Under the proposed guidelines, Foxconn's Hengyang and Changsha bases would be responsible for hardware and software development, and sales of new products. The company will also encourage its upstream and downstream partners to move their plants to Hunan.
In January 2011, Hunan's Department of Commerce said the local government would optimize the investment environment in the province, provide quality services, and offer preferential policies to Foxconn.
During the period of the 11th Five-Year Plan (2006-2010), 13 of the world's top 500 enterprises including OMRON Group, Siemens AG and ZTE Corp opened branches in Hengyang.
In December, Ding said the move reflected the company's efforts to tap into the cheap and stable supply of labor in inland China, but emphasized that "the investment has not yet finalized".
In the first quarter, Foxconn recorded its biggest drop in profit in two years, because of increased labor costs.
The company posted profit of NT$14.4 billion ($501 million), down 19.94 percent from the NT$ 17.99 billion recorded in 2010. It saw earnings of NT$ 1.49 for each share for the period between January and March.
