Foxconn's History Lesson for Apple

Lower sales at its biggest supplier suggests the iPhone maker's stock decline is far from done.
At Closing, April 23rd
165.24 USD

To those trying to figure out whether last week's little rebound in Apple Inc. shares has legs, let me introduce some historical dot points for you to mull over.

Thanks to the marvels of Taiwanese securities law, companies there must publish monthly sales figures. That includes Hon Hai Precision Industry Co., the Taipei-listed flagship of Foxconn Technology Group and the major assembler of Apple's iPhones.

While Hon Hai is the world's largest contract assembler of electronics and has a very long customer list, annual reports show that it consistently gets over half its sales from just one client. That means that Hon Hai revenue is the best proxy for Apple you're ever going to get.

In October, Hon Hai sales dropped 6.2 percent from a year earlier. As a reminder, iPhone 7 was released in late September. The last time Hon Hai's sales fell in the month immediately after an iPhone release was back in 2012 following the launch of iPhone 5.

Apple Health

Hon Hai sales hadn't declined in the month after an iPhone launch since the iPhone 5 was released in 2012

Source: Hon Hai

Note: The iPhone 4S was released in October 2011. This chart shows data for Nov. 2011. Analysis excludes iPhone SE released in March 2016.

Prior to last Tuesday's rebound, Apple shares had been falling since mid-October with down days exceeding up days by a two-to-one ratio. Something similar happened back in 2012 when a two-month decline started in September before a late November rally. That rebound didn't last and the slide resumed. By the time Apple stock hit bottom in April 2013, it had lost almost 45 percent.

Stock Seesaw

The link between Hon Hai monthly sales and Apple's share performance is worthy of examination

Source: Bloomberg

Then there are earnings and market reaction. Hon Hai's October sales occur during Apple's fiscal first quarter, which ends in December. When Apple reported on Jan. 23, 2013, its sales fell short of estimates -- a rare miss for the company, though by less than 1 percent, narrower than the few other times it came a cropper. Still, Apple's shares dropped 12 percent, the largest single-day post-earnings decline in the decade since the iPhone was first released, Bloomberg data show.


Apple shares had their worst post-earnings drop in 2013, three months after Hon Hai posted lower sales

Source: Bloomberg

Past results don't guarantee future performance, as the customary disclaimer goes. There have been a few black swan moments recently, including the election of Donald Trump as U.S. president and Apple's first sales decline in 15 years, so events may unfold differently this time. Yet there's also the trope that those who don't learn from history are bound to repeat it.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Tim Culpan in Taipei at

    To contact the editor responsible for this story:
    Matthew Brooker at

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