Foxconn press release:
Foxconn Interconnect Technology Limited (FIT) (HKG: 6088), a subsidiary of Hon Hai Precision Industry Co., Ltd., and Belkin International, Inc. (Belkin®, Linksys®, Wemo®, Phyn® brands) jointly announced today the signing of a definitive agreement under which FIT agreed to acquire Belkin International for approximately US$866 million in cash, creating a global consumer electronics leader.
Fine. But why?
Foxconn is the largest private employer in China (not important to the discussion, but interesting). They manufacture things for other companies, most notably Apple, Microsoft (Xbox One), Sony (Playstation), Nintendo (WiiU), and Intel (motherboards). How does Belkin help them?
Leveraging Belkin’s strength in research and development capabilities and the consumer products channel, FIT is expected to further tap into premium accessories and the smart home market. The transaction would also fuel the growth of Belkin’s portfolio of brands and products and supports further investment in research and development and engineering to expand FIT and Belkin’s presence in the U.S. and key markets globally.
Belkin owns Linksys. A mature, well known brand. Is Foxconn building its own end game, leveraging its move into the US and cheap manufacturing costs to compete in the consumer electronics space under its own auspices, a bit of a trojan horse, giving it instant legitimacy in the product space?
From The Financial Times:
FIT Hon Teng said in a filing to the Hong Kong stock exchange on Tuesday that the merger with Belkin, which manufactures products including wireless charging devices and networking products, will give it access to sales networks, technology and production capabilities.
Keep your eye on Belkin. I suspect they are in for a bit of a rocket ride.
Sounds like they want to move up the value chain, contract manufacturing is probably not that lucrative, though the scale is huge. While Belkin is no Apple, it is a more upscale brand than most generic made in China electronics and gadgets.
Spot on. Exactly my thinking.
It’s the first step in moving from what is, essentially, an anonymous (to most of the world) outsourced OEM to a brand consumers know and buy.
And you cut out the middle man — you’re selling the products yourself. More profit.
Probably diversification reasons. They can manufacture these products at a considerable competitive rate and it gets them into the home automation game rather quickly.
Belkin was a U.S. company. Now it will be Taiwanese.
Sorry, but when I think “R&D” or “premium” for accessories, Belkin isn’t on the list of companies I think of first.
I have maybe three Belkin products in my apartment. One’s an old Firewire 400 cable that I needed in a hurry ($40 at CompUSA). One’s an old iPhone 5C case (bought at substantial discount), and the last is a headphone cable-splitter that might as well have been branded “Radio Shack” or “Monoprice.”
Aim high, Foxconn.