iPhone dip may hurt Hon Hai earnings - Taipei Times
Mon, Jan 08, 2018 - Page 16 News List

iPhone dip may hurt Hon Hai earnings

QUICK FULFILLMENT:Analysts said wait times of two days or less, instead of five to six weeks, for iPhone X shipments indicate demand for the premium smartphone is waning

By Lauly Li  /  Staff reporter

Hon Hai Precision Industry Co’s (鴻海精密) earnings performance this quarter is estimated to fall below market expectations, due to sluggish demand for Apple Inc’s iPhone X, Daiwa Capital Markets Inc forecast.

“We think Hon Hai, the sole assembler for iPhone X, is not immune to the muted demand for the handset model,” Daiwa analyst Kylie Huang (黃奎毓) said in a client note on Wednesday.

Daiwa’s supply chain research shows that iPhone X component vendors are facing a quarterly decline in orders of between 15 and 25 percent, Huang said.

The “wait time” — which refers to the length of time between the placement of orders by consumers and the delivery of products by Apple — for the iPhone X in some major markets, such as in the US, the UK, Hong Kong, Singapore, Japan and China, is within two days, Huang said.

A longer wait time suggests that demand is stronger, Huang said.

When the iPhone X hit the market, the wait time was five to six weeks, Huang added.

The decrease in order fulfillment times affirmed Daiwa’s concern about weak iPhone X sales due to the product’s high price, Huang said.

Daiwa forecast that iPhone X shipments would reach 31 million units this quarter, compared with the overly optimistic estimates of between 35 million and 40 million units by other market researchers.

Given the tepid demand for the iPhone X, Huang said Hon Hai’s operating margin would likely stand at 3.5 percent this quarter, a decline of 2 percentage points from the 3.7 percent registered in the same period of last year.

Gross margin is forecast to be 7 percent during the January-to-March quarter, compared with 7.4 percent in the corresponding period of last year, Huang said.

Hon Hai’s net profit this quarter could climb by 24 percent annually to NT$35.01 billion (US$1.19 billion), Daiwa said, adding that the downbeat outlook for iPhone X sales might cap Hon Hai’s share price performance in the near term.

Yuanta Securities Investment Consulting Co (元大投顧) on Wednesday also lowered its forecast for iPhone X shipments this quarter from 30 million to 26 million units, based on its latest review of Apple’s supply chains.

The sales momentum of the iPhone X has been hurt by its high price tag, Yuanta analyst Jeff Pu (蒲得宇) said in a client note.

The only slightly larger 5.8-inch display has led to a less-than-expected shift of consumers from the iPhone 8 Plus with its 5.5-inch display to the iPhone X, Pu said, adding that this was also affecting iPhone X sales.

Resilient demand for the iPhone 8 Plus backed his analysis, Pu added.

Hon Hai has not released its financial results for the whole of last year. Net profit in the first three quarters of last year contracted by 16.04 percent annually to NT$67.07 billion, with earnings per share declining to NT$3.87 from NT$4.62.

Hon Hai’s net profit last quarter declined 5 percent annually to NT$65.31 billion, Daiwa said.

Daiwa forecast that the company’s net profit would increase 211 percent quarter-on-quarter from NT$21.02 billion.

Hon Hai on Friday rose 0.43 percent to close at NT$93.

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