TAIPEI (Reuters) – Taiwan's Foxconn is exploring sales of its new $ 8.8 billion factory in China, people familiar with the matter told Reuters as demand for the product diminishes amid an intensifying US-China trade war.
FILE PHOTO: A motorcyclist drives past the logo of Foxconn, the trade name of Hon Hai Precision Industry, in Taipei, Taiwan March 30, 2018. REUTERS / Tyrone Siu / File Photo
Foxconn, formally known as Hon Hai Precision Industry, is in talks to appoint banks to find a buyer for its liquid crystal LCD (LCD) factory being built in the southern Chinese city of Guangzhou, said two people with direct knowledge of the matter.
A sale would come at a delicate time for Foxconn, which has extensive investments in China, a large selection of US customers including Apple Inc, and who must navigate a difficult path amid the protracted trade war between Washington and Beijing. It should mark one of the biggest divestments from China.
Foxconn's discussions are at an initial stage, and a price tag has not yet come to light for the so-called Gen-10.5 system that specializes in large-screen LCDs, the sources said, and there was no guarantee to add a sale.
"It's not a simple sale, and it may take some time," said one of the sources, citing lukewarm global demand for big-screen LCDs.
Foxconn said in a written statement to Reuters: "As a matter of corporate policy, Foxconn does not respond to market trends or speculation." The sources asked for anonymity because the deliberations are confidential.
U.S. President Donald Trump vigorously lifted shares of the blue-branded war with China and swung global financial markets by pledging Thursday to impose a $ 10 billion US $ 300 billion tariff in China from September 1.
The trade war has disrupted technology's global supply chains in an important way, forcing Foxconn to consider its own. That and the declining demand for big-screen TVs and screens had prompted Foxconn's management to seek a buyer for the LCD system, said one of the sources familiar with the management's mindset.
Foxconn also raised questions about the need for the Guangzhou project. "Existing plants are not already running at full capacity … why need another one," the source said.
The other source said the new plant would not go into production until early October, making it less appealing to buyers because of the added risk compared to an already operational plant.
Nikkei reported earlier this year that the company would postpone most of its planned production in Guangzhou for a minimum of six months, but Foxconn said the project was planned.
Named the largest single investment ever in the southern city by Chinese media, Foxconn announced the Guangzhou facility in 2016, hoping to start operations by 2019 to meet an expected increase in demand for big screen TV is and displays in Asia, in a challenge to the top Chinese viewer BOE Technology Group.
The project was mainly driven by a joint venture between the Guangzhou government and Japan's Sakai Display Products, an advanced panel factory owned by Foxconn founder Terry Gou and Japanese Sharp Corp., Foxconn's display unit.
The Japanese panel manufacturer said on Thursday that it would build a plant in Vietnam to make flat screens and electronic devices to protect against additional US import tariffs on Chinese goods.
The global display industry has struggled with supply and tumbling revenues due to morbid sales of TVs and smartphones, and the worsening trade conflict that could raise product prices and dampen consumer demand.
On Thursday, Sharp reported a double-digit fall in profits for the quarter ended June due to slow demand for technology.
In April, Taipei-based Foxconn said it remained committed to building a Wisconsin display and technology research facility amid growing skepticism about the fate of the $ 10 billion project. Trump had cited Foxconn's Wisconsin plans as evidence that he was reviving American production.
But Foxconn is already under the spotlight for having failed so far in meeting Wisconsin job search goals.
The company told Reuters earlier this year that it was considering plans to make advanced LCD panels in Wisconsin.
Reporting by Yimou Lee; Editing by Anne Marie Roantree and Muralikumar Anantharaman