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Hon Hai solar energy deal unlikely to earn quick returns: analyst

Hon Hai solar energy deal unlikely to earn quick returns: analyst

A deal by Taiwan-based Hon Hai Precision Industry Co., the world's largest contract electronics maker, to invest in the solar energy business in China is unlikely to earn the company a quick profit, an analyst said Wednesday.

"Hon Hai's renewable energy is a long-term plan. I don't expect the investment in China will help Hon Hai make any profits soon, but the company will see some gains flow in a couple of years from now," Hua Nan Securities analyst Henry Miao said.

"That's why Hon Hai's shares remained in the doldrums Wednesday, even though the solar energy investment plan hit the front page of local newspapers," Miao said.

Shares of Hon Hai fell 0.72 percent to close at NT$83.30 (US$2.54) on the Taiwan Stock Exchange, where the weighted index ended down 1.37 percent at 8,229.62 points on Wednesday.

In an announcement made Tuesday, Hon Hai said it has invested US$18 million to set up a renewable energy company in Henan that will focus on the development of solar energy in China.

Hon Hai, widely known as Foxconn outside Taiwan, said Henan will serve as the company's starting point in developing its solar energy business, which plans to build solar power capacity of 400 megawatts by 2018.

The Henan investment is Hon Hai's first step in fulfilling a pledge to enter the renewable energy business in China, the company said, and it is determined to do more to meet electricity demand at its plant in Zhengzhou, which currently assembles iPhones for Apple Inc.

The solar energy development project in Henan is also the first stage of renewable energy cooperation between Hon Hai and Apple. In late October, Apple announced that it would work with Foxconn to build solar power plants in China to produce more than 200MW in solar power.

The Apple solar power development is expected to provide enough electricity to power more than 265,000 households in China for one year and begin offsetting the energy used by its supply chain in China. After Apple unveiled the clean energy initiative, Terry Gou, founder and chairman of Hon Hai, said the two business partners "share a vision for driving sustainability."

"Among Apple's suppliers, Hon Hai is one of the few which are able to follow the U.S. consumer electronics giant's step to come up with new investments quickly. It was no surprise that Hon Hai announced the Henan plan less than two months after Apple's October announcement," Miao said. (By Jalen Chung and Frances Huang)

Updated : 2021-09-20 00:35 GMT+08:00