The Strategist

While Everyone is Waiting for iPhone 6S, Foxconn is Losing Money

08/19/2015 - 15:09

Contract electronics manufacturer Foxconn, also known as Hon Hai Precision Industry, reported slowing earnings growth amid falling sales of iPhone. Buyers are waiting for the fall to see new products from Apple.

In II quarter of 2015, net income of Foxconn rose by 27% compared to year ago and reached a figure of 25.69 billion Taiwan dollars ($ 798.1 million). In I quarter, the vendor showed an increase of 56%, and in the final quarter of 2014 - 33%.

Foxconn's revenue totaled 972.7 billion Taiwan dollars ($ 30.2 billion), an increase of 11% year on year. The company's gross margin was 7.2%, whereas the market experts predicted rate of 7%. The profit was in line with the forecast of experts.

Company FIH Mobile, which is a part of Foxconn, producing smartphones by order of brands such as Xiaomi, Huawei and OnePlus, reported a doubling of net profit for the first half of 2015 - up to $ 130 million.

As has been noted, the Taiwanese company is dependent on the demand for the products of Apple, as the American partner brings more than half of revenue. In II quarter, iPhone sales were constrained due to the fact that September is expected to announce the next generation of Apple gadgets.

In recent years, Foxconn has been trying to reduce its dependence on Apple and electronics contract manufacturing. The company invests in the development of displays, software, media content, telecommunications solutions and robots.

In addition, decelerating growth of the Chinese economy and weakening demand for smartphones in the world have the negative impact on Foxconn’s business. However, so far the profitability of the company is even above analysts' expectations.

Recently, it also became known that the Taiwanese vendor is going to invest $ 5 billion in the construction of a new factory in India. Foxconn signed an agreement for a term of 5 years with the authorities of Maharashtra, that is home to 112 million people. Through this cooperation, the region will be able to increase the number of jobs by 50 thousand.

In May 2015, the founder and chairman of Foxconn Terry Gou said that the company plans to open in India about 10-12 objects until 2020, including plants and data centers. Local businessmen hope that the Chinese vendor will draw along its suppliers and other investors.

Taiwanese contractor is the first manufacturer in the development of production, which has decided to bet on India. This comes against the backdrop of numerous labor disputes in China, where the company's plants employ over 1 million people.