Hon Hai net income contracts

PRODUCT PORTFOLIO::The fall is widely believed to be a result of Apple Inc’s release of the iPhone X, while foreign-exchanges losses also dragged down gross margin

By Lauly Li  /  Staff reporter

Wed, Nov 15, 2017 - Page 12

Hon Hai Precision Industry Co (鴻海精密), a major assembler of Apple Inc’s iPhones, yesterday unexpectedly reported an annual contraction of nearly 40 percent in net income to NT$21.02 billion (US$696.49 million) for the third quarter.

The NT$21.02 billion marked Hon Hai’s lowest net profit in the third quarter since 2011, according to a company filing with the Taiwan Stock Exchange.

Gross margin retreated by 1.61 percentage points year-on-year and 0.98 percentage points quarter-on-quarter to 5.83 percent, the weakest in the past 16 quarters, the filing showed.

Operating margin plunged by 2.19 percentage points year-on-year and 0.98 percentage points quarter-on-quarter to 1.73 percent, the lowest level in the past 17 quarters, the company data showed.

“The contraction in gross margin and operating margin was mainly due to changes in the product portfolio,” a Hon Hai investor relations official said by telephone.

The official declined to elaborate, but it is widely believed that the major difference this year is Apple’s launch of the iPhone X, of which Hon Hai is the sole assembler.

The official said the appreciation of the yuan against the US dollar during the third quarter also weighed on margin.

Hon Hai’s net profit in the first three quarters of this year totaled NT$67.07 billion, down 16.04 percent from NT$79.89 billion in the same period last year.

Earnings per share dipped to NT$3.87 in the first three quarters from NT$4.62 in the same period last year.

Separately, Hon Hai yesterday announced that it is to sell a batch of G6 low-temperature polysilicon equipment to its flat-panel manufacturing arm Innolux Corp (群創) for NT$31.4 billion.

Hon Hai said in a statement that due to an exclusive request from a client it invested in the equipment at Innolux’s plant in Kaohsiung’s Lujhu District (路竹) in November 2014 in an effort to stabilize the supply of small and medium-sized flat panels.

The company is now focusing on the development of 8K resolution panels and 5G technology, Hon Hai said, while Innolux significantly needs to increase its production capacity for small and medium-sized flat panels, so it decided to sell the equipment to Innolux.

Innolux’s shipments of the small and medium-sized panels in the third quarter surged 27.7 percent quarter-on-quarter.

The company expects a further increase this quarter amid the peak season for smartphones, Innolux said in a statement.

The acquisition of Hon Hai’s equipment would increase Innolux’s global capacity share from 2 percent to 8 percent, Innolux said, adding that the growing capacity would accelerate the company’s development of high-end mobile flat panels.

Hon Hai spokesman Simon Hsing (邢治平) said the company is likely to book a loss of NT$8.77 million after selling the equipment.