Hon Hai takes hit from slow­ing iPhone sales

China Daily (Canada) - - LIFE - By MASI masi@chi­nadaily.com.cn

Firm’s re­liance on ma­jor client adds to its vul­ner­a­bil­ity

HonHai Pre­ci­sion In­dus­try Co, the man­u­fac­turer of Ap­ple Inc’s iPhones, posted its first an­nual rev­enue de­cline since 1991, as it wres­tled with a sat­u­rat­ing global smart­phone mar­ket.

The Tai­wan-based firm said on Tues­day it recorded NT$4.36 tril­lion ($137 bil­lion) in rev­enue in 2016, down 2.81 per­cent from a year ear­lier, af­ter its big­gest client Ap­ple saw slow­ing iPhones sales.

Founded in 1974 by busi­ness ty­coon Terry Gou, Hon Hai, also known as Fox­conn Tech­nol­ogy Group, is the world’s largest con­tract man­u­fac­turer of con­sumer elec­tron­ics. Ap­ple ac­counts for half of its busi­ness.

James Yan, re­search di­rec­tor at Coun­ter­point Tech­nol­ogy Mar­ket Re­search, said smart­phone ven­dors and their sup­ply chain part­ners are un­der big pres­sure as the global smart­phone mar­ket slows down.

“Hon Hai’s heavy re­liance on Ap­ple makes it ex­tremely vul­ner­a­ble to a sin­gle client’s sales per­for­mance,” Yan said.

In 2016, the global smart­phone mar­ket was ex­pected to grow by 0.6 per­cent yearon-year, far lower than the 10.4 per­cent growth rate in 2015, re­search firm In­ter­na­tional Data Corp es­ti­mated.

Hon Hai’s de­cline came af­ter Ap­ple re­ported in Oc­to­ber its first an­nual rev­enue dip since 2001. The US tech giant finds it in­creas­ingly hard to res­onate with con­sumers in China, the world’s largest smart­phone arena where lo­cal play­er­sHuawei Tech­nolo­gies Co and Oppo Elec­tron­ics Corp are gain­ing ground.

Ni­cole Peng, re­search di­rec­tor at Shang­hai-based con­sul­tancy Canalys, said al­though Chi­nese brands such asHuawei and Oppo have also turned toHonHai to as­sem­ble smart­phones, they only ac­count for a small slice of the lat­ter’s busi­ness.

“There is an ur­gent need for Hon Hai to di­ver­sify its rev­enue sources. We ex­pect ship­ments of iPhones to de­cline by 13 per­cent in 2016,” Peng said.

Al­though Ap­ple will see a stronger salesmo­men­tumthis year, with a ship­ment of 211.7 mil­lion units of iPhones, it will still be far less than the 231.5 mil­lion units in 2015, Canalys fore­cast.

But Xiang Li­gang, a smart­phone ex­pert and CEO of the tele­coms in­dus­try web­site cc­time.com, no­ticed a bright spot in Hon Hai’s fi­nan­cial re­port.

“In the quar­ter ended in De­cem­ber, sales were up 9.76 per­cent year-on-year, signaling big de­mand for the iPhone 7 Plus,” Xiang said.

“It is too early to pre­dict how Hon Hai and Ap­ple will per­form in 2017, be­cause this year marks the 10th an­niver­sary of the iPhone and Ap­ple may un­veil a cut­ting-edge prod­uct to re­vive its sales,” he added.

AP

Work­ers at the pro­duc­tion line at a Fox­conn Tech­nol­ogy Group com­plex in Shen­zhen, Guang­dong prov­ince.

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