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Hon Hai suffers setback in establishing retail chains

Hon Hai suffers setback in establishing retail chains

Staff Reporter

2014-06-19

Pan International Electronics, a subsidiary of Taiwan-based Hon Hai Precision Industry (also known as Foxconn), has already dumped its 48% stake in consumer electronics retail chain Cybermart, according to Shanghai’s China Business News, citing Taiwanese media reports.

It means that Hon Hai, the world’s largest electronics contract manufacturer, now only operates in the e-commerce sector in China, the paper said.

Hon Hai last year unveiled plans to establish the largest retail sales network for electronics on the mainland in an ambitious attempt to transform itself from a contract producer to a retailer, wholesaler and technology service provider. However, with setbacks in opening retailing channels, the road to establishing its own marketing channels seemed to have been tougher than the group anticipated.

For Hon Hai CEO Terry Gou, e-commerce was the only channel left to help expand his empire on the mainland. At a shareholder conference last year, Gou stated that the trade-in-services agreement between China and Taiwan, which was signed in June 2013, covered e-commerce. Against the backdrop, Hon Hai would spare no effort to make inroads into the growing e-commerce industry in mainland China, he said.

However, as the controversial pact remains stalled in Taiwan’s Legislature, the company reported slow progress in the development of its e-commerce platform. Sources from Hon Hai’s e-commerce sector told China Business News that Money Link, which Gou set up in 2013 to capture a share of the Chinese e-commerce market, was run by an number of individuals who were inexperienced in handling e-business operations.

There is a problem of experience, the sources told the paper, noting that some products which Hon Hai had manufactured under contract had sold well overseas but not in China.

The Taiwan-headquartered company had sold its brand name products in the mainland market through its retail chains, but the approach failed because it was only good at playing the role of a contract maker. “It was not easy for it to turn to the field of research and development,” household electronics expert Liu Buchen said.

“Foxconn (Hon Hai) is now walking on two legs — one big and the other small,” Liu said, explaining that the big leg represented contract production and the small one signaled brands. If the enterprise wanted to have a reasonable industrial structure, it had to fashion two legs of the same size, Liu added.

 

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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