Hon Hai Precision Industry Co., also known as Foxconn, recently reported significant growth in its April sales figures, which could imply a positive trajectory for iPhone sales amid a booming AI-related sector. In April, Foxconn, which is the principal assembler for most of Apple Inc.'s smartphones, observed a 19% increase in monthly sales, achieving NT$510.9 billion ($15.8 billion). This represented a significant increase from NT$429.2 billion in the same month the previous year and set a new record for the company's revenue in the month of April.
Foxconn is globally recognized for manufacturing the majority of the world's iPhones, but the company is strategically broadening its focus. It is now increasingly involved in producing server racks and other essential hardware for artificial intelligence data centers. This diversification is part of Foxconn's broader strategy to reduce its dependence on smartphone manufacturing, which has contributed to the company's stock reaching an unprecedented high this year.
Apple's business continues to be a major component of Foxconn's revenue, contributing more than half of its total income. As a result, the performance of the iPhone is particularly significant for Foxconn's financial health. This is evident from the nearly 10% decline in Foxconn's revenue in the first quarter of the year, primarily due to the underperformance of Apple's flagship product during that period.
Traditionally, the second quarter is a slower period for Foxconn, characterized by major products undergoing transitions between older and newer models. Despite these challenges, Foxconn's latest statement indicated that the company expects both sequential and year-on-year growth during this quarter, aligning with the general market expectations for this period.
Recently, Apple surprised investors with better-than-expected quarterly revenue figures from China, countering a series of negative projections about iPhone sales. This discrepancy between expectations and actual performance could be attributed to variations in the accounting methods used by different analysts or perhaps unexpectedly high average selling prices of iPhones.
China is a critical market for Foxconn, not only as a major consumer base but also as a pivotal global production center for iPhones. Moving forward into 2024, Foxconn might encounter challenges in boosting its iPhone-related revenue due to the subdued demand witnessed in the first quarter and the overall uncertainty in the market. As the largest producer of iPhones, Foxconn could face pressures on its profit margins if the economies of scale within the iPhone segment diminish, especially with the ongoing relocation of manufacturing capacities to India.
For the current fiscal period, Apple has set modest expectations for sales growth, anticipating an increase in the low single digits. The company is more optimistic about the growth prospects of its iPad and services divisions, predicting double-digit increases in these areas. However, Apple has chosen not to provide specific sales forecasts for the iPhone, suggesting a cautious approach amid varying market conditions.
05.05.2024
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