Chinese Contract Manufacturer Expanding - InformationWeek

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Chinese Contract Manufacturer Expanding

Hon Hai is accelerating its move into central China, where wages are lower than in its southern industrial base.

Though contract manufacturing powerhouse Hon Hai says it is committed to its massive industrial base in southern China, the company appears to be accelerating the ramp-up of other locations in the wake of rising wages in the south and a spate of suicides at its main factory.

Hon Hai plans to hire 100,000 people for its Chengdu production base in central China, in which the electronic manufacturing service will invest $5 billion. The company has started to hire 1,000 people there and may quickly expand to 10,000 by year-end. Wages in central China are up to 60% less than in the coastal regions, helping Hon Hai improve margins for gadgets it delivers to the likes of HP, Dell, and Apple.

Hon Hai is also opening a new industrial base in nearby Chongqing, which is expected to bring in $1 billion of investment and eventually have an output value of $10 billion per year while creating 50,000 new jobs. Hon Hai group chairman Terry Gou believes the new base will be a beacon of "independent innovation, integrated operations, and vertical integration" contributing to the development of western China.

Primarily known as a contract manufacturer, Hon Hai is also looking at diversifying into electronics retail shops in China. "A lot of people think of (Hon Hai) for its OEM production. However we are not novices in the field of IT retail. We have many advantages," said Gou. "We've actually been involved with electronics retail for 10 years."

Gou stressed that the firm's stores will only sell high-quality consumer products and will not have any involvement in counterfeit device distribution.

When confronted about the recent staff suicides and other problems that have given Hon Hai some unwanted press attention, Gou said that Hon Hai has been "misunderstood."

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