Hon Hai Profit Disappoints as Sales Sag Ahead of New iPhone

Hon Hai reported earnings that missed analysts’ lowest estimates as growth in worldwide smartphone shipments plateaued ahead of Apple’s 10th anniversary iPhone model this fall, according to Bloomberg.

The world’s biggest contract manufacturer of electronics reported net income of NT$17.88 billion ($589 million) in the three months ended June, the Taipei-based company said. That compares with the NT$23.7 billion average of analysts’ estimates compiled by Bloomberg.

Worldwide smartphone shipments grew just 3 percent in the second quarter, according to research firm Counterpoint. Much of that growth came from Chinese vendors such as Oppo and Huawei, which operate their own assembly plants instead of outsourcing to Hon Hai or other parts of Foxconn. And while the next iPhone is scheduled to be released in the fall, possible delays in mass production of the more complex model could curtail Foxconn’s third-quarter results.

Gou’s main listed vehicle assembles devices from Sony’s PlayStation to Hewlett-Packard computers but relies on Apple for half its sales. The U.S. company’s 10th anniversary model comes with an organic light-emitting diode screen covering almost the entire front and face scanners that could replace Touch ID fingerprint unlocking. Limited supply of OLED however could hamper production.

Over the long run, the company is also investing in emergent fields from virtual reality to artificial intelligence, and expand its manufacturing footprint beyond China. Foxconn is building a $10 billion liquid-crystal display factory in Wisconsin that may hire as many as 13,000 people. U.S. President Donald Trump has said the Taiwanese company’s investments in the country could reach $30 billion.

On the consumer electronics front, Hon Hai is slowly bringing Sharp back to life after taking over the money-losing Japanese company last year. Sharp reported a third straight quarter of profit, adding to evidence that its new owner is putting the company on track to end a three-year streak of losses.