New rules introduced in China

New rules introduced in China Jan. 1 last year have increased labor expenses, curbing companies’ profit. The government imposed minimum wage provisions, while Taiwan started requiring companies to pay taxes on employee stock bonuses.

“This year is very tough” in terms of outlook for the industry, Chairman Terry Gou (郭台銘) said March. 4. “In the short term, one or two months, we can see it’s not as bad as we were looking for, but we don’t know if this is continuous or just a short-term situation.”

Sony, whose PlayStation 3 games console and Vaio notebooks are made by Hon Hai, posted a 25 percent decline in sales for the three months to Dec. 31. Nokia, the world’s largest mobile-phone supplier, reported a 19 percent decline in revenue over the same period.

Hon Hai aims to sell as many as 370 million shares overseas to boost working capital, it said in a Jan. 21 exchange filing.

Hon Hai Precision Industry Co., the world’s largest contract electronics manufacturer, posted its third consecutive decline in quarterly profit as demand for computers and consumer electronics continued to slump.

Fourth-quarter net income dropped 65 percent to NT$9.3 billion ($267 million) from NT$26.6 billion a year earlier, according to Bloomberg calculations based on Taipei-based Hon Hai’s full-year results filed to the exchange Friday. That was lower than NT$16.8 billion, the median of seven analyst estimates compiled by Bloomberg News.

Hon Hai’s production costs rose, while clients Sony Corp. and Nokia Oyj reported declines in sales as the global recession drained demand for phones, computers and game consoles. Profit will fall a further 28 percent this quarter, analysts estimate.

Full year profit in 2008 declined 29 percent to NT$55.1 billion, according to Hon Hai’s statement. Net sales for 2008 rose 19 percent to NT$1.47 trillion.

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