Roger Fingas
Apple's primary assembly partner, Hon Hai — better known as Foxconn — beat gross profit estimates for the June quarter, but in what may be a sign that the manufacturer cut costs to cope with weaker demand, a report said on Friday.
The company's margin for the quarter was 7.2 percent, higher than an analyst consensus of 7 percent, Bloomberg noted. Net income was also slightly above expectations, up 27 percent to NT$25.7 billion, or $798 million. Analyst predictions averaged NT$25.2 billion (almost $783 milllion).
Both the Chinese economy and the overall smartphone market have been slowing down, however, making it likely that Hon Hai/Foxconn used cutbacks to keep profits high.
The company pulls in roughly half of its revenue from Apple, mostly through iPhone production. Although Apple set new internal records for the quarter, the 47.5 million iPhones it sold were below an average forecast of 48.8 million. Some analysts had been anticipating as much as 50 million.
Foxconn and Pegatron are believed to be resuming their roles as Apple's main manufacturers for the next round of iPhones, which could be announced as soon as Sept. 9. Apple is commonly expected to reveal an iPhone 6s and a 6s Plus, but might also surprise with an iPhone 6c, which has been rumored as having a smaller 4-inch screen.
Andrew Orr
Wesley Hilliard
Malcolm Owen
Christine McKee
William Gallagher
9 Comments
Apple sold what it predicted to sell. Analysts were wrong. They should explain why they overestimated.
Nice numbers, but something doesn't match:
Let's say you are right with those 5.2B.
Foxconn accounts for assembly costs for Apple. On iphones, these are said to be about 5%.
So 5.2B/0.05=104B in iphone value produced by foxcoon per year.
Cost of iphones for Apple is about $200: 104,000,000,000 / 200= Does it Foxconn made 520 million iphones last year?
We need more precise figures to conclude the impact of yuan. Anyway, I agree with you that the impact for Apple will be minimal. It's simply a matter of the supply/demand curve behavior, and inelasticity of that demand. Which is the case of iphone in China. Apple may rise prices with little or no impact in sales numbers.
One potential tweak to the math: 50% x $11.4 = $5.7 (not 5.4) Correct me if I'm misinterpreting something. Other than that tweak, I agree with your narrative.
Sounds like the tech media is spewing BS numbers again.
Foxconns annual revenue is over $100 billion
http://www.forbes.com/sites/ralphjennings/2014/08/27/foxconn-falls-out-on-slowing-growth/
So Apple pays them $50 billion a year? Bullshit.
This is media spin again. Trying to make Apple look bad by saying foxconn is having shrinking revenue so it means iPhone revenue will be down (since Apple is 50% of their revenue)
The Street is worrying about slowdown or negative growth not Chinese not buying iPhone at all. The Yuan devaluation is an after effect. Chinese economy is slowing down fast forcing devaluation to avoid recession. The slowdown means some Chinese are getting richer less thus forcing them to reconsider purchasing an iPhone. Economy is not a simple deductive reasoning. It is more like a chain reaction.
Nice numbers, but something doesn't match:
Let's say you are right with those 5.2B.
Foxconn accounts for assembly costs for Apple. On iphones, these are said to be about 5%.
So 5.2B/0.05=104B in iphone value produced by foxcoon per year.
Cost of iphones for Apple is about $200: 104,000,000,000 / 200= Does it Foxconn made 520 million iphones last year?
We need more precise figures to conclude the impact of yuan. Anyway, I agree with you that the impact for Apple will be minimal. It's simply a matter of the supply/demand curve behavior, and inelasticity of that demand. Which is the case of iphone in China. Apple may rise prices with little or no impact in sales numbers.
Cost of assembly is just a small part of the BOM, most of it doesn'T go to FOXCON. That explains things.