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Foxconn industrial PC unit slows down M&A, eyes 'Made in China 2025'

Ennoconn sees significant sales contribution from past M&As this year

Ennoconn aims to significantly raise its presence in China in the coming years.   © Reuters

TAIPEI -- Hon Hai Precision Industry's industrial PC unit Ennoconn said it will scale back from mergers and acquisitions and expend more energy in developing smart manufacturing opportunities in China once it completes the purchase of a domestic semiconductor and display facility builder.

"Securing the 'Made in China 2025' business opportunities is our top priority now, which is also in line with the parent company Hon Hai's strategy," Ennoconn Chairman Steve Chu told an investors' conference in Taipei. "Made in China 2025" is an industrial policy blueprint Beijing approved in 2015 that lays out the country's plan to upgrade China's manufacturing base in 10 strategic sectors, such as robotics, semiconductors, aviation and new energy vehicles.

Ennoconn in late March launched a bid to acquire a 51.12% stake in facility builder Marketech International for 5.33 billion New Taiwan dollars ($181.53 million). Marketech's customers include Taiwan Semiconductor Manufacturing  Co., the world's largest contract chipmaker, and Innolux, a display panel maker and another Foxconn unit.

Chu said Ennoconn will suspend M&As larger than NT$1 billion for a while, as the company has been receiving massive orders for the Chinese market since it launched the acquisition of Marketech.

The orders are mainly from small- and medium-sized enterprises in China seeking IT and smart manufacturing solutions from Ennoconn, Chu said, adding that the company needs time to digest the orders in cooperation with Marketech.

Ennoconn Chairman Steve Chu

Chu said the sales contribution from Asia Pacific, including China, currently only accounts for 11% of Ennoconn's total revenues, and the company aims to significantly raise its presence in China in the coming years.

To get ready for "Made in China 2025," Ennoconn set up headquarters in China's Suzhou July last year. The Suzhou operations include research and development, manufacturing, marketing, channels management, and after-sales service, Ennoconn President Kenny Deng said.

Deng said Ennoconn plans to develop the Chinese market from coastal cities to inland cities, focusing on smart manufacturing and smart transportation. "We will continue to expand our operation and investment in China. The market will become Ennoconn's major growth engine," he said.

With support from Hon Hai, better known as Foxconn Technology Group, Ennoconn listed on Taiwan's stock market in March 2014. Ennoconn's annual revenue was NT$3 billion at the time.

Ennoconn aggressively expanded its operations in Europe and North America through M&As over the past four years. Its revenue ballooned 141.19% annually to NT$34.9 billion last year, which incorporates sales contributions from IT groups S&T and Kontron.

The Taiwanese IPC maker launched the acquisition of a 29.4% stake in the Austria-based S&T for 152 million euros ($188.25 million) in 2016. It indirectly owns a stake in German industrial PC brand Kontron through S&T's investment.

Ennoconn forecast S&T's revenue will increase more than 10% to 1 billion euros this year from last year's 882 million euros. Chu said S&T's contribution to Econnonn's bottom line will increase 150%, Chu said, without elaborating.

Chu said Ennoconn's industrial handheld subsidiary GoldTek recently received new orders from a U.S. smart home company, which will fuel the growth of GoldTek this year.

"The synergy from the past M&As is expected to strongly manifest this year, lending support to Ennoconn's earnings performance this year," Chu said.

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