iPhone maker Foxconn's profit beats views in sign of resilient demand

By Jane Lanhee Lee and Debby Wu

Key iPhone assembler Hon Hai Precision Industry Co. reported stronger-than-expected profit, suggesting demand for Apple Inc.’s signature devices proved better than feared.
 

Net income in the September quarter came to NT$43.13 billion ($1.3 billion), compared to the average analyst estimate of NT$34 billion. Apple’s latest iPhone, released in September, sparked an upgrade cycle among owners of older iPhones in the US, though it has fallen shy of its predecessor in China.

Hon Hai, the key public arm of Foxconn Technology Group, gets over half of its sales from Apple. The US firm warned this month that revenue in the holiday quarter will be about level from 2022 as the company grapples with an unexpected challenge from Huawei Technologies Co. and an increasingly hostile business environment.

Sales for July to September slid more than 11% to NT$1.54 trillion, according to numbers previously released by the world’s largest contract electronics manufacturer.

The Taiwanese company’s revenue is expected to drop about 4% to NT$1.89 trillion in the fourth quarter, according to analyst estimates. Full-year sales are estimated to fall 6.3% to NT$6.21 trillion, which would mark the first yearly revenue contraction since 2016. 

Apple and Foxconn are both facing growing challenges in China. Beijing has expanded bans on iPhones to government-backed agencies and state-owned enterprises, while new 5G handsets from Huawei are providing fresh competition.

Meanwhile, China began a probe into Foxconn’s tax issues and land use in the country after founder Terry Gou announced his bid for Taiwan’s presidency. Foxconn makes the bulk of Apple’s handsets from the central Chinese city of Zhengzhou.  

Foxconn is trying to find new growth drivers beyond a core gadget assembly business that renders razor-thin margins and relies heavily on China for manufacturing resources. It’s branched out to emerging fields including electric vehicles and low-Earth orbit satellites, although these new ventures have yet to generate significant revenue for the company.