Hon Hai Beats Profit Estimates After Pandemic Spurs Apple Demand

(Bloomberg) — Key Apple Inc. partner Hon Hai Precision Industry Co. reported profit that beat estimates after the Covid-19 lockdown boosted demand for iPads and MacBooks assembled by the flagship unit of Foxconn Technology Group.The Taiwanese company posted net income of NT$22.9 billion ($778 million) for the quarter ended in June, compared with the average analyst estimate of NT$18.1 billion. Revenue was NT$1.13 trillion, down 2.8% from the year ago period, according to Bloomberg News’ calculations based on previously reported monthly sales figures.Hon Hai is bouncing back from a record profit slump in the first quarter as production at its factories recovered and shelter-in-place orders spurred demand for home computing equipment. The pandemic likely boosted iPad and Mac sales, even as Apple store closures weighed on iPhone sales, Apple CEO Tim Cook said on July 31 after reporting quarterly revenue that crushed estimates. Apple accounts for half of Hon Hai’s sales.Read More: Apple Smashes Revenue, IPhone Estimates on Pandemic DemandEven as Apple outperformed, Hon Hai’s other customers have fared less well. Hong Kong-listed subsidiary FIH Mobile Ltd. said in its Aug. 7 earnings release that while Huawei Technologies Co.’s new phones have been popular in China, they missed expectations elsewhere following U.S. sanctions. Another key customer Xiaomi Corp. suffered a backlash in the Indian market amid growing tensions between China and the South Asian country. FIH lost $100 million in the first half.Foxconn has been shaking up its traditionally China-centric operations. Hon Hai is among Apple assembly partners that plan to expand operations in India, potentially helping the iPhone maker grow its presence in the country of 1.3 billion and shift some of the U.S. company’s supply chain outside of China as ties between Washington and Beijing worsen.The Taiwanese company is also facing growing challenges from Chinese rivals. Local electronics titan Luxshare Precision Industry Co. is poised to become the first Chinese homegrown iPhone assembler after sealing a deal in July to buy an Apple handset production plant from Wistron Corp.While Hon Hai will keep assembly orders for premium iPhones, Luxshare will eat into the business for mid-to-low end Apple handsets, Fubon Securities analyst Arthur Liao wrote in a July 23 note.Orders could further be affected after President Donald Trump issued an executive order barring U.S. residents from doing business with Tencent Holdings Ltd.’s WeChat. Annual iPhone shipments could plunge 25%-30% if Apple is forced to remove the app from its App stores worldwide, TF International Securities analyst Kuo Ming-chi warned in an August 9 note.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


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