FIH Mobile Ltd (富智康), a handset manufacturing arm of Hon Hai Precision Industry Co (鴻海精密), yesterday saw its shares slump the most in seven years after the company said first-half profit would plunge as much as 92 percent.
FIH Mobile shares dropped as much as 21 percent, the most since October 2008, to HK$2.52 in Hong Kong. At the close in Taipei trading, Hon Hai shares fell 2.12 percent to close at NT$73.8.
FIH Mobile is the latest member of the global smartphone industry to flag a weakening in the sector amid an unprecedented decline in shipments and a slowdown in China.
Strategy Analytics on Friday last week reported that global smartphone shipments fell for the first time in history during the first quarter of this year.
Meanwhile, foreign institutional investors cut their holdings in Hon Hai at the beginning of last month amid concerns over the Taiwanese firm’s earnings, in particular after Apple Inc, the company’s most important client, reported disappointing results for the three months to March.
In a statement filed with the Hong Kong Stock Exchange on Thursday, FIH Mobile said its net profit for the first half is expected to range between US$10 million and US$20 million. That compares with a profit of US$129.8 million the previous year and analyst estimates for US$109.3 million.
The assembler of smartphones for Xiaomi Corp (小米) and Sony Corp said that the expected lower earnings were partly because orders placed by its major clients declined, since its customers have been in a transition period.
“FIH [Mobile] has suffered from a slowdown in smartphone shipments at its key customers since the second half of last year including Xiaomi and Sony,” analysts at China International Capital Corp (CICC, 中國國際金融) led by Andrew Lin (林榮彥) said in a report.
CICC cut the stock to “hold” from “buy,” as did analysts at Daiwa Securities Group Inc and Jefferies Group LLC.
The Hon Hai subsidiary said that lackluster demand from its major clients could push down its sales for the first half of the year to a level below US$2.465 billion, down 35.6 percent from US$3.83 billion the previous year, effecting its gross margin. Analysts were expecting revenue to reach US$3.7 billion.
In addition, income from service fees and molding sales from FIH Mobile’s customers has also been on the decline, placing more downward pressure on the company’s bottom line, FIH Mobile said.
Additional reporting by CNA
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