Mon, May 13, 2013 - Page 13 News List

Hon Hai’s second half to be decided by Apple: HSBC

ALL-IMPORTANT APPLE:The electronics maker saw first-half sales decline, and HSBC said that a rebound hinged on the success of Apple’s new products

By Kevin Chen  /  Staff reporter

The performance of the next Apple Inc iPhone and iPad will be critical to Hon Hai Precision Industry Co’s (鴻海精密) growth momentum in the second half of the year, HSBC Securities Taiwan Corp said on Friday.

The brokerage made the comment after Hon Hai reported that sales in the first four months of the year fell 15.89 percent from a year earlier.

“By leveraging these new products, Hon Hai would be well positioned to grow its second-half revenue by 30 percent from the first quarter,” Jenny Lai (賴惠娟), head of equity research at HSBC Securities, said in a report.

“The iPhone is particularly important because analysts’ consensus forecast suggests 50 percent growth in unit shipments in the second half from the first half, and it is one Hon Hai’s highest-margin products,” she said.

NO. 1 CUSTOMER

On Friday, the world’s largest contract electronics maker said its consolidated revenue dropped to NT$1.1 trillion (US$36.9 billion) during the period from January to last month from the NT$1.31 trillion it reported in the same period last year.

The 15.89 percent annual decline in first four-month sales was an improvement from the 19.21 percent annual drop Hon Hai registered for the first three months of the year, company data showed.

Analysts have said that Hon Hai’s performance is mostly dependent on its largest customer, Apple, whose product transition can lead to fluctuations in Hon Hai’s earnings and sales.

However, a faster-than-expected product roadmap for Apple’s new iPhone, iPad or TV could help Hon Hai buck the downward trend in the PC market, they say.

POSSIBLE DELAYS

Lai said in the report that production of Apple’s next-generation iPhone and iPad would likely start in July, ahead of the products’ launches, which have been scheduled for September.

However, two anticipated iPad mini models — the iPad mini retina and low-cost iPad mini — might be facing delays, she said.

“The new retina display for the retina iPad mini is experiencing production yield rate issues, which means that unit volume could remain low until October,” Lai said.

“Meanwhile, the low-cost iPad mini is facing a bottleneck in reducing costs in the design and manufacturing processes to meet the original budget, which may delay its launch,” she added.

Lai predicted that Apple would contribute up to 40 percent of the NT$3.66 trillion that Hon Hai is expected to earn in revenue this year.

Hon Hai also produces televisions for Sony Corp, PCs for Hewlett-Packard Co and smartphones for Sharp Corp.

Last year, its consolidated revenue totaled NT$3.91 trillion, up 13.33 percent from the NT$3.45 trillion posted in 2011.

Hon Hai shares ended 1.35 percent lower at NT$80.5 on Friday. The stock has declined 9.45 percent so far this year.

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