Hon Hai Precision Industry Co (鴻海精密), a major assembler of iPhones, yesterday posted its strongest first-quarter earnings in about 14 years and raised its gross margin outlook for this year, as a better product mix and a more favorable foreign exchange rate help it combat rising manufacturing costs and operating expenses.
Net profit expanded 5 percent year-on-year to NT$29.45 billion (US$987.49 million) from NT$28.16 billion. However, on a quarterly basis, net profit plummeted about 34 percent from NT$44.4 billion.
Gross margin improved to 6.02 percent from 5.8 percent a year earlier, but declined from 6.03 percent in the prior quarter.
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Hon Hai said in March that gross margin would be under pressure this year, as the Russia-Ukraine war and COVID-19 restrictions push up manufacturing costs, especially for raw materials.
However, “we now expect gross margin in the first half to be better than the 5.92 percent registered in the same period last year. For the full year, gross margin will be higher than last year’s 6.04 percent,” Hon Hai chairman Young Liu (劉揚偉) told an online investors’ conference in New Taipei City yesterday.
Product mix is a deciding factor in the company’s gross margin trend, Liu said.
Hon Hai focuses on making mid to high-end electronics products, which are less affected by inflationary forces, Liu said.
Surging inflation is having a greater impact on entry-level electronics, as lower-income earners feel the squeeze most, Liu said.
“We have clearer [order] visibility now than we did in March,” Liu said.
Revenue is forecast to be flat this quarter and for the full year, he said, sticking with the company’s March forecast.
Computing products would post significant growth this quarter and for the full year, benefiting from market share gains and faster capacity expansion for PCs and servers at its Mexico site, Liu said.
Cloud-based servers are another business that is showing robust growth momentum this quarter, he said.
Smart consumer electronics, mainly smartphones, which accounted for 52 percent of the company’s revenue last quarter, are forecast to decline this quarter due to product transition, the company said.
Hon Hai’s electric vehicle business drew investors’ attention yesterday, as the firm said it has signed a contract manufacturing agreement and a joint-venture agreement for product development with Lordstown Motors Corp. Hon Hai is to invest US$55 million in the new joint venture, giving it a 55 percent stake.
Based on the joint-venture agreement, Hon Hai and Lordstown will use the Taiwanese firm’s MIH Open EV Platform to codesign and develop vehicle programs for the global commercial vehicle market.
Hon Hai added that it completed the purchase of Lordstown’s electric light-duty truck manufacturing facilities in Ohio yesterday, paving the way for Hon Hai to make its first electric trucks for Lordstown in the second half of this year.
The Ohio electric vehicle facilities would also be utilized to produce electric sedans for Fisker Inc, starting in 2024, Liu said.
Hon Hai plans to invest US$500 million to convert some electric truck manufacturing facilities in Ohio into an electric sedan manufacturing site, he said.
Hon Hai also raised the shipment target for Model C electric vehicles to 10,000 units next year from its previous estimate of 5,000 units.
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