Hon Hai rings up third quarterly gain in a row on strong iPhone sales

PUBLISHED : Thursday, 14 August, 2014, 9:53am
UPDATED : Thursday, 14 August, 2014, 9:53am

Taiwan’s Hon Hai Precision Industry reported a third consecutive gain in quarterly profit as the world’s largest contract maker of electronic goods continued to benefit from demand for products from Apple, its top customer.

Hon Hai, which operates as Foxconn Technology, earns as much as 50 per cent of its revenue assembling Apple devices such as iPhones and iPads, analysts say.

Still-hot sales of iPhones drove Hon Hai’s net profit in the April-June quarter to NT$20.19 billion (HK$5.2 billion), beating the NT$17.66 billion mean estimate of 13 analysts polled by Reuters.

The result edged past the NT$19.54 billion earnings in the January-March quarter and was 15 per cent higher than the NT$16.98 billion in the second quarter of last year.

It’s hard to see [Hon Hai] growing really rapidly in the near future
Kylie Huang, analyst, Daiwa Capital Markets

In the second quarter, Hon Hai took two leaps in a strategy aimed at reducing dependence on assembling a relatively narrow range of devices for a single customer.

In May, the company said it would buy 23 per cent of Taiwanese mobile network provider Asia Pacific Telecom for almost US$400 million. Analysts say the purchase was a step towards operating its own telecommunications brand on the island.

The following month, Hon Hai said it would buy 4.9 per cent of South Korean information technology service provider SK C&C for a similar amount.

Daiwa Capital Markets analyst Kylie Huang said these investments were unlikely to change Hon Hai’s reliance on contract manufacturing in the near term.

“It’s going to take time for Hon Hai to prove itself in these new fields,” Huang said. “The company is already huge and it’s hard to see them growing really rapidly in the near future.”

In the meantime, the widely expected release in the coming months of larger-screen iPhones will keep Apple as Hon Hai’s biggest cash cow for the foreseeable future, company watchers say.

Hon Hai employs more than one million people at peak manufacturing times throughout Asia, Europe and North America.