FOXCONN Q3 NET PROFIT TUMBLES 39PC
IPhone X production bottleneck seen as likely cause
FOXCONN reported a 39 per cent slide in quarterly profit, far worse than expected, as the assembler of Apple Inc products saw margins squeezed by production bottlenecks for the iPhone X.
While the 10th anniversary version of iPhone has seen parts suppliers struggle with specifications for new features, red-hot demand for the product, which went on sale this month, is expected to lead to a relatively rapid recovery for Foxconn.
Apple has predicted strong holiday sales and said it was happy with how manufacturing of the iPhone X was progressing, although analysts think it will likely take until next year for the tech giant to meet demand.
The world’s largest contract electronics manufacturer, known formally as Hon Hai Precision Industry Co, said third-quarter net profit tumbled to T$21 billion (RM2.92 billion), some 42 per cent below an average estimate from analysts.
It was Foxconn’s first quarterly decline in a year and marked its biggest profit drop for a quarter since at least 2009. Revenue was flat.
Some analysts also attributed the profit slide to an appreciation in the value of the yuan as well as to labour idled due to a later-than-usual launch for Apple’s new smartphone.
Although the iPhone 8 kicked off sales in September, which was in line with its previous new phone launches, demand was lacklustre as consumers waited for the iPhone X.
Foxconn is widely believed to be the sole manufacturer for the iPhone X. It manufactures the bulk of iPhones at massive facilities in China, and Nomura Securities estimates it produces around 67 per cent of all iPhones Apple sells, with the rest made by the likes of Taiwan’s Pegatron Corp and Wistron Corp.
Shares in Foxconn fell as much as 2.8 per cent in trade yesterday to their lowest level since late September, underperforming the broader Taiwan market which was down 0.5 per cent.
The stock, worth US$61 billion (RM254.33 billion), declined 10 per cent over the past three months, pressured by weak sales for the iPhone 8 and concerns over the iPhone X.