Apple's top manufacturing partner had profit decline even before COVID-19 outbreak
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Contract manufacturer Foxconn, also known as Hon Hai Precision Industries Cos., assembles the majority of iPhone models produced every year. The company's assembly lines also churn out products designed by Huawei, Xiaomi, Motorola, Sony and more. According to Bloomberg, today the company reported a 24% drop in its quarterly earnings to the equivalent of $1.58 billion from the $2.05 billion it earned during last year's quarter.
Foxconn had to offer a higher signing bonus to attract the usual number of seasonal workers
Half of Foxconn's revenue is generated by assembling the iPhone and other Apple devices. Even though the company is slowly gearing up its assembly lines to produce the 2020 5G iPhone models, these devices aren't expected to go through the manufacturing process until July and already there are conflicting reports about whether Apple will be able to unveil and launch the iPhone 12 family in September as it traditionally does. That's because Foxconn relies on Apple's supply chain to deliver the components and parts it needs to build the phones. And any minor hiccup in the supply chain could result in delays.

Render of the iPhone 12 Pro Max
Recently, Foxconn announced that it has hired the usual number of seasonal workers needed to run its factories at full speed during the summer although higher "signing bonuses" had to be promised. And while that will certainly help with the supply end of the equation, the COVID-19 outbreak has many questioning the demand side of the industry. The U.S. and China signed off on "Phase One" of a possible trade agreement which means that smartphones won't be hit by the U.S. import tax. It also reduced the tariff amount charged on other tech imports. But smartphone demand has been sluggish even before the current crisis began. Still, as the transition to 5G continues, the industry should get a boost as consumers make the switch to a 5G phone. And depending on how the foldables niche pans out, additional demand might be seen as foldables become less expensive and more useful.
The relationship between the U.S. and China certainly remains a wild card although the upcoming presidential election could shake things up. Still, Foxconn is looking to expand its production facilities and is spending $561 million to build factories in both India and Vietnam. Foxconn already builds certain iPhone models in the former and Vietnam has often been mentioned as a possible new home for Apple.
Foxconn shares closed at the equivalent of $2.31 USD each on the Taiwan Stock Exchange today, a decline of .14%. The 52 week high is $3.21 USD and the 52 week low is $2.17 USD. Apple is expected to release its fiscal second-quarter report on May 5th.
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