Foxconn reports lower than expected Q2 earnings; report bodes poorly for global smartphone market

Contract manufacturer Foxconn, known as the company that assembles the majority of Apple iPhone units, surprised analysts today by reporting lower than expected earnings for the second quarter. For the three month period from April through June, the company earned the equivalent of $567.25 million USD. That was well below the mean estimate of $711.45 million USD forecast by nine analysts.

Foxconn's lower than expected report could be a symptom of a global smartphone market that isn't exactly setting the world on fire. It also points toward tepid handset sales globally during the second half of this year. While Apple did sell a few more iPhone handsets during its fiscal third quarter than it did during the same quarter last year, it fell short of Wall Street estimates by 500,000 units. But investors focused on other positives including a 20% year-over-year rise in the average selling price for each iPhone, which hit $724. That indicated strong sales of the premium priced iPhone X during the quarter.

Foxconn's factories will soon be running at full speed as Apple is expected to introduce three new 2018 iPhone models next month (see image at the top of this article, courtesy of DetroitBORG). According to a report from Fubon Securities in Taiwan, Foxconn will be responsible for 100% of the 5.8-inch Apple iPhone X sequel, 90% of the 6.5-inch Apple iPhone X Plus model, and 75% of the 6.1-inch Apple iPhone 9. The latter will feature an LCD display, unlike the OLED screens used on the other two models.

Last month, Foxconn offered a one-time bonus of $295 USD to assembly line workers at its factory in Zhengzhou, China, who renewed their contracts. This assures the company that it will have enough workers to run the assembly lines when it needs them humming around the clock.

On the Taiwan Stock Exchange, the lower than expected earnings sent Foxconn's shares down by 2.3% to the equivalent of $2.46 USD.

source: Reuters