Apple iPhone-Maker Hon Hai Posts First Sales Slide on Record

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  • The Taiwan company has struggled alongside its biggest client
  • It gets about half its sales from making Apple iPhones, iPads

Hon Hai Sees First-Ever Sales Decline

Hon Hai Precision Industry Co., the main assembler of Apple Inc.’s iPhones, recorded its first annual revenue decline after the global smartphone market went through its worst year on record.

The company, also known as Foxconn, posted a 2.8 percent fall in 2016 sales to NT$4.36 trillion ($136.5 billion), it said in a filing to Taiwan’s stock exchange, mostly in line with analysts’ estimates. It was Hon Hai’s first decline in annual revenue since listing in 1991, and comes as Terry Gou’s Foxconn Technology Group prepares to invest billions of dollars in display-making capacity after taking control of Japan’s Sharp Corp.

The world’s biggest contract manufacturer of electronics has been grappling with the smartphone slowdown, the result of maturing markets and a decelerating Chinese economy. It’s deployed robots and boosted production efficiency to drive down costs but its fate is intertwined with Apple’s, which is trying to regain investors’ confidence after less-than-stellar quarterly earnings. Pegatron Corp., which also makes Apple products, posted a 27 percent slide in December sales to NT$84 billion.

Shares of Hon Hai’s smaller rival dropped as much as 7 percent on Wednesday to their lowest since November. Hon Hai was mostly unchanged.

Apple accounts for about half of Hon Hai’s sales, according to data compiled by Bloomberg. In October, the iPhone-maker reported its first annual revenue decline since 2001 and forecast sales of $76 billion to $78 billion for the holiday quarter. That’s barely higher than expectations despite arch-rival Samsung Electronics Co.’s issues with the now-defunct fire-prone Note 7.

Chinese rivals such as OPPO and Huawei Technologies Co. have also steadily grown global market share at the expense of Apple and Samsung. Those brands rely on in-house manufacturing, bypassing Foxconn and Pegatron because of the perception that they pander to Apple, according to Roger Sheng, a Gartner analyst based in Shanghai.

“South Koreans are making devices on their own, and the Chinese brands think Hon Hai is too expensive and doesn’t devote the most attention to their orders,” Sheng said.

— With assistance by Yuan Gao

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