Mon, Apr 15, 2019 - Page 16 News List

Hon Hai seeks growth with unit spin-offs

POSITIVE OUTLOOK:Yuanta analyst Vincent Chen said that Hon Hai is expected to be the biggest winner in terms of iPhone market share in the second half of the year

By Lisa Wang  /  Staff reporter

Hon Hai Precision Industry Co (鴻海精密), a major assembler of Apple Inc’s iPhones, on Thursday announced a strategy to spin off business units as it seeks growth.

To safeguard the interests of employees, the company has offered benefits and perks to workers in affected units, Hon Hai said in a statement.

The remarks came after local media earlier last week reported that some employees at Hon Hai’s camera lens unit had expressed concern over proposed reductions in benefits following a planned spin-off of that unit.

The camera lens unit is reportedly planning a debut in Hong Kong next month, but Hon Hai did not confirm a share offering.

Hon Hai posted record revenue for last quarter as higher shipments boosted revenue by 42 percent last month.

In the first three months of the year, revenue rose 2.82 percent to NT$1.056 trillion (US$34.2 billion), compared with NT$1.027 trillion in the same period last year, company data released on Wednesday showed.

The quarterly figures largely matched Yuanta Securities Investment Consulting Co’s (元大投顧) estimate of NT$1.063 trillion and Deutsche Bank AG’s forecast of NT$1.056 trillion. Fubon Securities Investment Services Co (富邦投顧) was more optimistic with a prediction of NT$1.15 trillion.

For this year, Yuanta analyst Vincent Chen (陳豊丰) and Deutsche Bank analyst Birdy Lu (呂佳霖) raised their revenue forecasts by 5 percent and 2.3 percent to NT$5.302 trillion and NT$5.15 trillion respectively.

Hon Hai’s top position in the iPhone assembly market would remain intact, benefiting revenue growth this year, Chen said.

“For the iPhone XR, Hon Hai’s order allocation had risen from 40 percent to 60 percent as of the end of 2018. Also, the company is the major assembler of the OLED model. As a result, we expect Hon Hai to still be the biggest iPhone market share winner in the second half of 2019,” Chen said in a note to clients.

“Moreover, we believe the company’s networking business will benefit when the 5G era arrives, and Hon Hai is also trying to cut into hyperscale data centers for its server business,” he said.

However, Fubon analyst Arthur Liao (廖顯毅) cut his revenue forecast for this year by 7 percent to NT$4.923 trillion in expectation of a 20 percent year-on-year decline in iPhone shipments.

Hon Hai has not yet released its bottom line results for the first quarter.

The iPhone assembler reported strong profit of NT$62.62 billion for the final quarter of last year on the back of improving gross margin due to higher production yields as well as aggressive cuts to operating expenditure and lower tax rates.

Hon Hai shares on Friday rose 3.22 percent to close at NT$86.5 in Taipei trading.

The stock has risen 22.18 percent since the beginning of the year.

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