Foxconn shares to feel heat after profit warning

PUBLISHED : Friday, 22 July, 2011, 12:00am
UPDATED : Friday, 08 May, 2015, 4:18pm

Shares in Foxconn International Holdings are likely to come under pressure today after the world's largest contract mobile phone handset maker issued a profit warning last night.

Foxconn International, a unit of Taiwan's Foxconn Technology group, revealed in an 8.23pm statement it would record a loss for the half-year to last month.

The company, whose customers include Nokia and Motorola, has been suffering from a series of problems, from rising labour costs and social unrest in China to weak demand for its traditional mobile handsets because of the success of smartphones.

Foxconn International did not outline its reasons for sounding the earnings alert last night. The already loss-making firm simply said it would: 'continue to show a loss' for the six months to last month. It said the loss would be smaller this time around than in the first half of last year, when it plunged US$144 million into the red.

While parent Foxconn Technology makes Apple's iPhone, Hong Kong-listed Foxconn International is stuck in the traditional mobile handset market. In its latest annual report, Foxconn International lamented traditional mobile phone sales were 'fragile'. It blamed unemployment and home foreclosures in the US, while also admitting losing out to 'new software and applications'.

Analysts have previously criticised Foxconn International for not working hard enough to obtain tablet PC orders to make up for its lack of smartphone business, though the firm claims to be upgrading its engineering capabilities.

Foxconn Technology has been hit with a spate of suicides by mainly young, migrant workers at its southern China manufacturing compounds in the past two years.

A 21-year-old Foxconn Technology employee fell from the sixth floor of a factory dormitory in Shenzhen, the Chinese-language Hong Kong Economic Times reported earlier this week. There were more than a dozen suicides at Foxconn last year.

The suicides have become emblematic of the deep unhappiness migrant workers feel about putting in back-breaking hours for breadline wages. Exacerbating their anger, inflation is running at a three-year high in China.

Investors in Foxconn International may take some cold comfort from the fact the company has issued a profit warning, however, as this is something the firm has failed to do on time in the past.

The company was censured by the Hong Kong exchange last month for neglecting to issue an earnings alert in 2008, despite knowledge its performance had weakened.


The price of a Foxconn share, in Hong Kong dollars, yesterday

- The company's share value has declined by 36 per cent this year