Foxconn, formally known as Hon Hai Precision Industry Co. , is discussing a possible investment with the government of Zhengzhou, about 750 kilometers south of Beijing, according to people familiar with the talks. The two sides are discussing terms such as how to divide the investment, which could reach as much as 35 billion yuan ($5.7 billion), the people said.
The two sides have yet to formulate a concrete investment proposal but if an agreement is reached, it might be Foxconn's largest direct investment to date in the manufacturing of high-end parts.
It's unclear if Apple or other companies have been approached to invest in the plant. Foxconn already manufactures some iPhone components like metal casings and cables; however, being difficult to make, mobile displays have much higher margins.
The move is important to Foxconn, whose sales are up only 1% on an annual basic. Operating profit margin has also slowed to 2.8%, down from 4.4% in 2009. It would also be good for Apple, letting the company further diversify its screen suppliers.
“Foxconn hopes to capture the growing demand for high-resolution, energy-efficient displays and supply Apple and other smartphone makers in the next few years,” said a source.