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Foxconn Account Update27 Sept 2007

Foxconn Company Profile

Foxconn Overviewwww.foxconn.com

• The #1 EMS(Electronic Manufacturer Service) player in the world. Sales last year jumped 44%, to $41 billion.

• Foxconn is the registered trade name of Hon Hai Precision Industry Co., Ltd, which was established in 1974, and listed on the Taiwan stock exchange in 1991.

• Mechanical/Electromechanical solution provider to 3C industries

– Communications/Networking– Consumer Electronics– Computer industries

• Largest exporter from mainland China.• CAGR>60% since 1991 • Foxconn’s clout comes in part from its ability to produce many

of its own components, which helps driving down costs and winning more outsourcing contracts. To keep the momentum going the company has been diversifying its product mix into the production of LCD panels and digital cameras.

• Founder, Chairman of the Board, and General Manager - Guo, Taiming(Terry)

#206, 2006

BizWeek Global Info Tech 100 #4, 2007 #2, 2006

Revenue Size

Financial Highlights

Product/Service ProvidedThree Categories

• ComponentsSuch as connectors and cable assemblies for computers and peripherals;

• ModulesMechanic modules and electronic modules, such as desktop personal computer (PC) enclosures and surface mount devices (SMDs),

• System AssemblyProducts that are assembled and integrated with connectors, cable assemblies, PC enclosures, SMDs, memory cards, central processing units and related software. The products are applied in computer, communication and consumer electronics (3C) products.

Foxconn’s Objective and Strategy

• Objective - Leader to provide solution to 3C industries• Strategy

– Develop strategic relationship with industry leaders By working closely with top-tier PC and IC companies, Foxconn is able to predict market trends accurately and introduce new products ahead of its competitors.

– Focus on the development of global logistic capabilitiesThis enables Foxconn to respond quickly and efficiently to the customer's requirements around the world.

– Expansion of production capacityFoxconn currently has production facilities in Asia, Europe, and the United States. Expanding its existing production capacity increases economics of scale.

– Achieve further vertical integrationFurther integration of the production process allows Foxconn to exercise better control over the quality of its products.

– Maintain technologically advanced and flexible production capabilities This increases Foxconn's competitiveness relative to its peers and allows it to stay one step ahead of the opposition.

– New productsFoxconn will leverage off its manufacturing expertise and continue to move tirelessly into new areas of related business.

Foxconn’s Customer ProfileMajor Customers by Products

• High customer concentration. Top 10 customers account for around 80% of the revenue.

• The concentration has enabled the customer focus strategy. Foxconn can then provide better quality product/service mix with lower cost.

Foxconn’s Revenue Breakdown

By Product/Service CategoryBy Product/Service Category

By SegmentsBy Segments

EMS Industry Competition Dynamics

• Although the industry has showed slowdown recently, the competition actually become even more fierce.

• Business Model is evolving rapidly in the industry - More verticalization and R&D focus.

EMS Industry Trends and Implications

Implications• Key EMS players have

adopted aggressive acquisition strategies to enhance product capabilities, integrate operations and thus result in higher cash flows

• EMS players need to introduce new products and technologies quickly which requires requires a substantial investment

• Companies with globally diversified low cost operations will have an edge over others

Source: Datamonitor June 2005, Citigroup Nov 2005

Key TrendsKey Trends

• The global EMS sector has gone through a slump from 2000-2004• The global EMS sector’s value fell by over 6% in 2001 and 2002. In 2004,

the sector was at $103.6 billion, which equates to a CAGR of -1.7% since 2000

• This poor performance was due to a slump in the electronics and technology end-user marketplaces following the bursting of the technology bubble

• Off-late the EMS industry is showing signs of recovery and is expected to exhibit strong growth over next five years

• Computers and communications companies provided the greatest demand for EMS in 2004, generating 84% of the sector’s global revenues

• The global economy will continue its recovery, including several of the biggest EMS markets e.g. US, Japan, France and Germany

• By 2009, the EMS sector is expected to reach $138.2Bn at a CAGR of 5.9% over 2004-2009

• The EMS industry faces a rapid pace of changes• The EMS sector is characterized by rapidly changing technologies, frequent

new product introductions, short product life cycles and evolving industry standards

• The outsourcing in the EMS sector will continue to be a major opportunity• Lower-cost production will be a key factor in facilitating the trend towards

outsourcing as companies adapt to increasing costs within the sector

• The global EMS sector has gone through a slump from 2000-2004• The global EMS sector’s value fell by over 6% in 2001 and 2002. In 2004,

the sector was at $103.6 billion, which equates to a CAGR of -1.7% since 2000

• This poor performance was due to a slump in the electronics and technology end-user marketplaces following the bursting of the technology bubble

• Off-late the EMS industry is showing signs of recovery and is expected to exhibit strong growth over next five years

• Computers and communications companies provided the greatest demand for EMS in 2004, generating 84% of the sector’s global revenues

• The global economy will continue its recovery, including several of the biggest EMS markets e.g. US, Japan, France and Germany

• By 2009, the EMS sector is expected to reach $138.2Bn at a CAGR of 5.9% over 2004-2009

• The EMS industry faces a rapid pace of changes• The EMS sector is characterized by rapidly changing technologies, frequent

new product introductions, short product life cycles and evolving industry standards

• The outsourcing in the EMS sector will continue to be a major opportunity• Lower-cost production will be a key factor in facilitating the trend towards

outsourcing as companies adapt to increasing costs within the sector

Foxconn Organization Chart

Board

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10 Business GroupsShared Service Departments

Business Group

• Each Business Group(BG) serves one specific industry segment. For example, WLBG(listed in HK as FIH) serves wireless industry segment. BG provides services spanning across R&D, trial run to mass production, global logistics, post-sales service etc.

• In general, each BG is composed of 5~10 Business Units(BU). One BU serves one to several customers. BU organization is structured to serve different customers. For example, Nokia, Motorola, etc.

• CCPBG (Consumer Product Business Group ）• CNSBG (Network System Business Group)• PCEBG (Personal Computer Enclosure Group ）• CMMSG (Computer Module Move & Service Business Group) • NWInG (Net-Work Inter-connector Group)• iDPBG (integrated Digital Product Business Group)• SHZBG (Super Hong-Zhun Business Group)• WLBG (WireLess Business Group)• INNOLUX (Innolux TFT-LCD Business Group)• MOEBG (Mechanic Optical and Electrical Business Group)

10 Business Groups(BG)@FoxconnNote: The definition of BG/BU becomes blur at Foxconn nowadays as the business grows so fast that the previously called BU under Industry BG can be named with BG because of the business size.

IT Organization at Foxconn

• IT Department at HQ is called SIDC (System Information Dynamic Control)

• SIDC(System Information Dynamic Control) is responsible for Griup system planning and implementation, software development, system integration and maintenance, service auditing, IT talent development.

• At Foxconn, IT is considered a battle team, not only a supporting organization. Example, in recent acquisition of Priemier, IT was the first group sent for managing the M&A.

• Overall, IT organization at Foxconn can roughly be categorized into HQ Central IT and BG IT.

– When Foxconn starts a new BG/BU. Central IT will grow their IT capability. Once matured, Central IT will let the BU-specific IT team function independently within new BU. Once this BU dissolves, Central IT will absorb the resources back.

– Group IT owns the ERP hosting environment– For IT issue resolution process, BU IT is the first line and Group IT second

line.

Oracle Opportunities

• ASCP/SNO/ PLM products in more than 100 subsidiary companies (BU).

• Replacement of current financial system (Tiptop) for more than 100 subsidiary companies

• A new ULA in FY08 Q4 for some of the above.

• Largest and far leading EMS company in the world as global customer reference.

• Under instruction of Chairman of Board (Founder), signed an agreement with Nanjing Govt in June 07 for purchase of a land and construction of the largest software development park. Foxconn (Nanjing) Software Co. plans to have 600 software engineers end 2007, 30,000 software engineers 2012.

• 5,000 captive suppliers base in China where Foxconn is dominating their business. Joint opportunities with Oracle to capture 5-10% of this captive ERP/SCM/CRM space ( ie. 250 - 500) in next 3-5 years

• 12.5M to 25M software market opportunities for Oracle (lowest assumption of 50K per prospect)

• 2 times services market opportunities of 25M to 50M

Inside Foxconn Beyond Foxconn