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Hon Hai and HP Set Up JV for Cloud Servers

May 12, 2014 | By Steve Chuang

The Taiwan-based Hon Hai Precision Industry Co., Ltd., now the world's biggest EMS (electronics manufacturing service) firm, and Hewlett-Packard Co. (HP), the global giant of servers, together announced April 30 a joint-venture partnership on cloud servers, a move that, according to the both parties, is likely to revolutionize the current global supply chain in the industry.

The partnership was established by Hon Hai's chairman, Terry Gou, and HP's CEO, Meg Whitman, after the two signed an agreement for setting up the planned joint venture at Hon Hai's headquarters in New Taipei City, northern Taiwan, though declining to publicize details.

At the event, Gou said that through the cooperation project, Hon Hai and HP will inject new momentum into the global market in the way that the current supply chain in the industry will be reshaped, while aiming to consolidate the both sides' leading status in the cloud computing sector.

Meanwhile, Whitman stated that the partnership with Hon Hai may be regarded as HP's continuous pursuit of business model innovation in the cloud segment.

On another front, Gou commented that development of cloud computing has changed from the group up the supply chain of the global market for servers, and that suppliers to survive the transition must have strong design capability, global production and distribution networks, as well as complete after-sale services, to better respond to customers' ever-changing demand.

To adapt to the increasingly challenging market, the chairman stressed that in the short term, Hon Hai, with strong R&D and vertically integrated manufacturing capabilities, and HP, remarked for its industry-leading cloud computing technology and excellent services, will complement each other's competitive advantages to launch “game-changing” solutions in the global market for cloud servers.

On the partnership, institutional investors commented that it is the first between brand vendors and contract manufacturers ever in the global server industry, and will severely threaten other players in the field, given that the two firms both have overwhelming influence in their respective fields. According to statistics compiled by Gartner Inc., a British market research firm, HP, for instance, commands over a quarter of the global market for servers as the largest brand now.

Among the most likely victims of the Hon Hai-HP partnership, institutional investors pointed out, are Wistron Corp. and Inventec Corp., both Hon Hai's Taiwanese counterparts and contract suppliers for HP's servers. The two firms will likely lose orders to Hon Hai in the future. (SC)


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