Foxconn solidifies pivot to OBM with Guangzhou government deal

Foxconn recently inked a deal with the Guangzhou Municipal government to build an 8k LCD panel production park in the city’s Zengchen District, signaling its intention to monetize the technology and brand strength after its takeover of Japanese electronics firm Sharp last year.

Under the deal, Foxconn will invest 61 billion RMB in the 10.5-generation 8k LCD panel production park (in Chinese) via its subsidiary Sakai Display Production (SDP). The production park is expected to start mass production in 2019, with output value estimated at around 92 billion RMB per annum once the production reaches capacity.

In January, Foxconn reported its first annual revenue decline since it listed in 1991. Its revenue dropped 2.81 percent from a year earlier to US$ 136.38 billion for 2016 (in Chinese), dragged down by declining orders for Apple’s iPhone 7. As a major contract manufacturer of the U.S. smartphone maker,  Foxconn derived more than 50 percent of its operating revenue from Apple.

To get rid of its Apple-reliant woes, Foxconn has been shifting from a contract manufacturer to an original brand manufacturer (OBM); the big-ticket investment is part of its efforts to diversify its income away from overdependence on a single client.

Sharp is the world’s only firm that owns operation capacity of and has experience with the 10.5-generation LCD line. This will help Foxconn shorten construction and running-in period in its new Guangzhou SDP plant.