Amazon is growing on-demand services after reporting a 20% sales increase in 2015.
Hon Hai, better known as just Foxconn, which manufactures electronic goods for clients like Apple, Amazon and Microsoft, plans to boost its business line of selling manufacturing molds and other mechanical products through a new B2B e-commerce site.
Hon Hai Precision Industry Co., the world’s largest electronics contract manufacturer, plans to launch a Chinese online business-to-business trading platform in 2014. The Taiwanese company, better known by its trading name Foxconn Technology Group, manufactures many well-known electronics products, including Apple Inc.’s iPhone and iPad, Amazon.com Inc.’s Kindle and Microsoft Corp.’s Xbox.
Although manufacturing is Hon Hai/Foxconn’s core business, the company is showing signs that B2B e-commerce will become a more important part of its overall business in the next few years.
“Hon Hai/Foxconn is not just a manufacturer and we will gear up to develop our e-commerce business in 2014,” chairman Terry Gou said in a recent company annual meeting. “E-commerce business and 4G network products could jointly help us boost the annual revenue from currently around 4 trillion New Taiwan dollars (US$132.16 billion) to 10 trillion New Taiwan dollars ($330.41 billion) in the next 10 years.” The company is already the largest e-commerce company in China in terms of what it buys and sells online, according to China’s National Bureau of Statistics. 4G refers to high-speed cellular phone networks.
The company last year started to build a B2B e-commerce site, b2bfoxconn.com, to sell online such things as molds used in forging electronics products, according to sources familiar with the project and who asked to remain anonymous. It calls the site Fujinji (which translates to “Golden Machine”). The site is being managed directly by Hon Hai’s mold manufacturing subsidiary, Super Precision Mechanical Business Group. The project is still under construction and sources say the site will start to operate in the first quarter of 2014.
The major business of b2bfoxconn.com is to sell mechanical parts, such as industrial products molds and mechanical components to Chinese small and mid-size companies, the company says in a statement on its corporate web site, Foxconn.com.
Hon Hai/Foxconn declined to comment on the launch of B2B e-commerce site.
Hon Hai/Foxconn’s revenue increased about 22% from 3.21 trillion New Taiwan dollars ($106 billion) in 2012 to 3.91 4 trillion New Taiwan dollars ($130 billion) in 2013, but its revenue relies heavily on the manufacturing orders from one company, Apple Inc. About half of its revenue comes from assembling iPhones and iPads, and its gross margin was only around 3% in 2013, Hon Hai says in its 2013 annual report. Analysts say e-commerce could help improve margins.
“Manufacturing companies including Hon Hai/Foxconn are increasingly speeding up their B2B e-commerce development in recent years,” says Zhang Zhouping, senior analyst of the China E-commerce Research Center. “By adding a new online channel, Hon Hai/Foxconn hopes to find more enterprise-level clients.”
“Besides, Hon Hai/Foxconn has been suffering from its low margins,” Zhang adds. “In the long run, their new B2B plan might boost their margins and offset rising labor costs.”
Found in 1974, Hon Hai/Foxconn employs more than one million workers and operates factories in multiple countries, including Mexico and the Czech Republic. The majority of Hon Hai/Foxconn’s factories are in mainland China, the company says.
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