Hon Hai Falls After Revealing Profit Slump on Phone Slowdown

  • Third straight earnings fall for Apple’s main iPhone assembler
  • Taiwanese company has won Chinese approval for Sharp takeover

Hon Hai Precision Industry Co. fell the most in almost a year after reporting its third straight quarterly earnings decline, as a global slowdown in smartphone demand hurt the main assembler of Apple Inc.’s devices.

The stock dropped 3.7 percent, the greatest decline since Aug. 2015. Net income slumped 31 percent to NT$17.7 billion ($565 million) in the three months ended June, lagging the NT$24.6 billion that analysts had expected.

The world’s biggest contract manufacturer of electronics is battling a widespread slowdown in smartphones and personal computers as Apple, its largest customer, predicts a third straight quarter of declining sales. While Hon Hai is trying to move up the consumer food chain with a deal for control of Sharp Corp., it remains dependent on orders from other companies to drive sales.

“Hon Hai is not immune to the downward trend as a major assembler for iPhones,” Daiwa Capital Markets researchers led by Kylie Huang said before the earnings. “We expect the iPhone production volume to decline by 9 percent year-on-year in 2016.”

The company said Thursday that China has approved its takeover of Sharp, removing a hurdle to a deal intended to broaden Hon Hai’s ability to supply next-generation electronics components. The Japanese company’s shares rose as much as 20 percent in Tokyo, on track for their biggest gain since February.

While new iPhones are expected to be unveiled next month, researcher IDC said industry shipments would rise just 3.1 percent in 2016 -- the first time in history that annual growth has fallen to single digit levels.

Revenue at Hon Hai fell 5.2 percent to NT$922 billion compared to analyst expectations of NT$937.8 billion, according to an e-mailed statement. Affiliate FIH Mobile Ltd., which assembles devices for Xiaomi Corp. and Sony Corp., said Friday that first-half net income slumped to $21.4 million from $129.8 million a year earlier.

Hon Hai doesn’t provide revenue breakdowns, forecasts or hold investor conferences.

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