Foxconn Suffers As iPhone Slowdown Bites

Hon Hai Precision Industry Co Ltd, which trades under its more commonly known name of Foxconn, has posted a worrying 19 percent decline in sales during the first quarter.

The decline is being blamed on disappointing demand for the Apple iPhone 5, prompting fears that the Foxconn decline could foreshadow the upcoming financial results from Apple.

Revenue Decline

For the January to March period, Foxconn reported a 19 percent decline in sales, hitting NT$808.97 billion ($26.96 billion or £17.6bn), according to Reuters which obtained the financial results. Analysts had reportedly been expecting sales of NT$895 billion (£19.4bn).

This sales figure is well down from the NT$988.34 billion (£21.5bn) it posted in the fourth quarter. In the same year-ago quarter Foxconn posted sales of NT$1 trillion (£21.7bn).

The decline is spreading a ripple of alarm around industry observers, as Foxconn is estimated to get 60 to 70 percent of its revenue from manufacturing iPhones and iPads for Apple.

“A quarterly decline was expected, but not a yearly decline,” KGI Securities analyst Ming-chi Kuo was quoted as saying by Reuters. “This shows that Hon Hai’s revenue depends too much on Apple, and iPhone orders corrected more than expected.”

And looking forward, Reuters quoted Kuo as saying that he expected Foxconn to post flat sales in the second quarter compared with the first, adding that its net profit is also likely to come under pressure in the first half of this year.

Apple Implications?

The news comes after Foxconn revealed in February that it had slowed the hiring of new workers at its factories in China, a move that led some to fret at a possible Apple slowdown.

And there is no doubt that the financial shine is starting to come off Apple, despite it recording impressive financial results in January. However it missed Wall Street expectations, and it also disappointed with its shipment figures for the latest iPhone.

Apple said it shipped a record 47.8 million iPhones in Q1, which was up 29 percent from the year-ago period but below the 50 million that analysts had expected to see. This is triggering some concern that the days of blockbusting smartphone sales for Apple is over, and all eyes will be eagerly examining Apple’s financials when they are released later this month.

Samsung meanwhile dramatically raised its profit forecast for the January to March quarter last week. And Apple is also facing renewed pressure from the likes of Nokia and BlackBerry, thanks to their reinvigorated product lines.

Earlier this month, it was reported that Apple will begin production of a new iPhone sometime this quarter ahead of a possible summer release. The new smartphone is expected to be an upgraded version of the current iPhone 5 rather than a radically different model.

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