Foxconn acquires Microsoft’s smartphone facility

Foxconn’s poor record of making good on its commitments was improved somewhat with its Microsoft acquisition-Photo: Duc Thanh

Global software giant Microsoft last week announced the sale of its feature phone business to FIH Mobile Ltd, a subsidiary of Taiwan’s Foxconn, and to Finland’s HMD Global Oy for $350 million. FIH Mobile would also acquire the Microsoft Mobile Vietnam factory in Bac Ninh as a part of this deal.

The acquisition deal, scheduled to be completed in the second half of 2016, marked the second sale of the factory, previously owned by Finland’s Nokia, with a total registered capital of $302 million.

Prof. Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises, told VIR that the investment could be a success as Foxconn’s headquarters are in Taiwan, one of the fastest-growing IT development markets in the world. It mainly manufactured on contract to other companies such as Apple Inc. and Intel Corp. “With a thorough knowledge of the Vietnamese market, the Taiwanese investor may restructure the Bac Ninh facility and have better investment strategies to take over the world’s mobile market share,” Mai said.

While Microsoft’s move has caused controversy in the technology market in recent days, the deal’s value of $350 million remains far lower than Microsoft’s earlier $7.17 billion acquisition over Nokia’s Devices and Services section.

According to Mai, this is normal business activity in this market. Mergers and acquisitions (M&As) are now the main trend in the world’s business activities. M&As now account for 30 per cent of the world’s total foreign direct investment.

The deal with Microsoft proved that Foxconn still has a strong interest in Vietnam, despite the fact that it failed to realise its previous commitment to invest $5 billion in many projects in Vietnam.

In 2007, Foxconn announced that it would invest $5 billion in Vietnam and this was expected to help bring Vietnam into the global supply chain. At that time, the Taiwanese company signed a cooperation framework with the Ministry of Planning and Investment, pledging to invest in a series of projects in the hi-tech sector and supporting industries. It was also linked to investment agreements in Ho Chi Minh City, Haiphong, Bac Ninh, Bac Giang, Vinh Phuc, and Binh Dinh.

Foxconn kick-started its Vietnamese investment by opening two factories, worth $160 million in total, in Bac Ninh’s Que Vo Industrial Park. In 2008, they were licensed to build a $200-million smartphone project in Vinh Phuc. It also planned facilities in Bac Giang. A $1-billion industrial park on the outskirts of Ho Chi Minh City was also due to be developed. However, these ambitious investment plans seemed to fizzle out when Foxconn’s Vinh Phuc project had its investment licence revoked in 2015. Meanwhile, the hi-tech project in Bac Ninh went bankrupt, and other Foxconn investment commitments in Binh Dinh, Haiphong, and Ho Chi Minh City remain unclear.