The publication Nikkei Asian Review reported last week that global contract electronics provider Hon Hai Precision Industry, also known as Foxconn, and its LCD panel manufacturing arm Innolux, have acquired equity stakes in North America based television brand Vizio. This move has significance expanding the consumer electronics supply chain ecosystem in the U.S. for the production and assembly of televisions.
According to the report, Foxconn will acquire a 3.1 percent equity stake in Vizio amounting to just shy of $25 million, while Innolux will acquire a 4.14 stake, just shy of $45 million, for a combined equity investment of $70 million.
The investment reportedly insures that Innolux supports a steady stream of supplying Vizio with LCD panels. The LCD panel maker assembles around 300,000 televisions per month, including those branded as Sharp, which is now controlled by Foxconn.
The publication is quick to note that the Vizio investments came one week ahead of this week’s groundbreaking ceremony for Foxconn’s previously announced $10 billion LCD manufacturing plant in Southwest Wisconsin. While Foxconn has not elaborated on its new Vizio investment, Nikkei reporters speculate that the deal paves the way for potential television assembly operations at the new Wisconsin manufacturing site, while giving access to U.S. sales channels developed by Vizio.
The global consumer electronics sector as a whole continues to deal with an oversupply glut of LCD panels that is expected to continue for months. Suppliers from Japan, Taiwan and South Korea continue to pump-out the latest technology for small and large-screen applications and according the Nikkei report, with little collaboration, will continue to depress prices.
The strategy involving Foxconn and Vizio may well add a new twist, adding ample supply availability in the U.S. which has long had dependence on sourcing from Asian suppliers.
We must quickly add that the big open question for this strategy revolves around the rapidly building trade tensions involving and the United States, including access to new technologies. On the one hand, added U.S. import tariffs make U.S. based manufacturing of LCD screens an attractive option. On the other hand, with the current dizzying pace of tariff announcements from each country, it is difficult to speculate what the trade landscape will look like 1-2 years from today.
In a separate report from The Street.com, Foxconn Chairman Terry Gau called the current U.S.-China trade dispute a “tech war” and the biggest challenge to the globe’s largest contract electronics manufacturer. He equated a “trade war” to a “manufacturing war.” That statement may well be an indication that Foxconn finds itself in a very delicate quandary, having to prepare for the fallout of ongoing tensions among Beijing and Washington.
A quandary indeed.
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