Foxconn Shares Plunge 20% on Profit Warning; Outlook Bleak

HONG KONG -(Dow Jones)- Shares in Foxconn International Holdings plunged 20% in early Hong Kong trade after the company warned late Friday its profit for the six-months ended June 30 fell significantly from a year earlier due to changes in product mix and rising operational costs.
Analysts said Foxconn, which makes mobile phones and other consumer electronics for clients such as Nokia and Motorola, isn't likely to see a major turnaround in earnings during the second half of this year as the company grapples with a slowdown in handset demand from the weak global economy.
Typically demand for handsets and other electronic goods rises in the second half of the year spanning the back-to-school and holiday shopping season.
"Although there will be a mild improvement in demand in the second-half due to strong seasonality, 2008 will still be a poor year for Foxconn and other contract handset manufacturers," said Charles Guo, an analyst at JP Morgan.
At the midday break, Foxconn shares were down 20% at HK$6.18, underperforming the benchmark Hang Seng Index, which fell 1.2%. Foxconn didn't give any earnings estimates for the first half in its statement Friday. It posted a net profit of US$324.0 million in the first half of 2007.
Guo expects Foxconn's net profit to fall 8% this year to US$660 million from US$721 million in 2007.
He has a "neutral" rating on Foxconn, with a 12-month price target of HK$8.00.
JP Morgan said global handset original equipment manufacturers are facing declining profitability due to a higher mix of low-price models as well as increasing competition in the high-end segment especially in Western Europe.
HSBC analyst Christine Wang wrote in an Aug. 13 report that she expects a weaker second half for handset manufacturers in Asia, with only a 2% quarter-on-quarter rise in shipments in the third quarter compared with a high single-digit historical increase.
"We still don't know how bad (Foxconn's first half result) is. It could be worse than expected. We expect there will be more earnings downgrades across the board after its results come out Aug 27," said Wang, who cut Foxconn's target price to HK$10.00 from HK$16.00 recently and has an "overweight" rating.
The Taiwan-based blue chip company said in June it expects its gross profit margin to fall this year because of a price war as well as higher costs and corporate taxes in China.
Foxconn said at the time it will continue to migrate its production facilities to low-cost sites internationally and invest aggressively in automation to minimize the decline in its gross profit margin.
Foxconn's weak performance also dragged down shares in some of its peers in Asia as it raised concerns about a weaker-than-usual second half.
In Taiwan, shares of Foxconn's parent, Hon Hai Precision Industry, fell 3.6% to NT$162.5.
Hon Hai is the world's largest contract maker of electronics by revenue.
Shares in Taiwan's Compal Electronics fell 3% to NT$30.35, while Quanta Computer was down 0.8% at NT$45.65. Both companies make notebook computers on a contract basis. Chang Chihming, an investor relations officer at Compal, said the company hasn't seen a slowdown in demand so far in the third quarter.
"We are not as affected as the handphone business. I can already see back-to-school demand and Christmas demand," said Chang, adding that the company expects third-quarter shipments to improve 20% from the second quarter.
HSBC analyst Wanli Wang said the market for handsets is weak, but he doesn't expect this to impact Hon Hai significantly as the company is seeing strong orders for desktop computers as well as game consoles.
18th August 2008

FIH reportedly to forge partnership with China-based Longcheer

12 May 2008
Foxconn International Holdings (FIH), the Hong Kong-listed handset subsidiary of Foxconn Electronics (Hon Hai Precision Industry) reportedly is in talks to establish a strategic partnership with China-based handset design company Longcheer Holdings, according to industry sources in Taiwan and China.

FIH net earnings inch up just 1% in 2007

24 April 2008
Foxconn International Holdings (FIH), the Hong Kong-listed handset subsidiary of Foxconn Electronics (Hon Hai Precision Industry), saw its net profits grow only 1% to US$725 million in 2007, according to the company.
Net EPS (earnings per share) were US$0.1027 in 2007, compared to US$0.1031 in 2006, the data show.
FIH cited intensified competition in the global OEM market and volatile market demand for the relatively weak growth last year. However, market sources in Taiwan indicated that both FIH's revenues and earnings were affected by a decline in sales at Motorola.
FIH said that it divested its operations in Michigan in 2007 to better realign its global resources. Market sources pointed out that the company's business unit in Michigan was set up to cope with the needs of Motorola.
For 2008, FIH will continue to expand its capacity in Langfang and Taiyuan in China as well as in India, the company said.

HTC revenues to decline over 38% sequentially in 1Q08 due to chipset shortages, says paper

24 Dec, 2007

High Tech Computer (HTC) revenues are expected to decline 38.5% sequentially to NT$24 billion (US$738.5 million) in the first quarter of 2008 from the NT$39 billion projected for the fourth quarter of this year due to an insufficient supply of chipset solutions from Qualcomm, according to a Chinese-language Commercial Times report.
Despite a capacity ramp by Qualcomm, HTC is expected to receive up to only 70% of the CDMA and WCDMA solutions its needs for the first quarter of 2008. This will consequently affect HTC's shipments of CDMA handsets to the US and WCDMA handsets to Europe, the paper said.
In addition, handset shipments from Foxconn International Holdings (FIH) and Chi Mei Communication Systems (CMCS) to Nokia are also likely to be affected by Qualcomm's supply shortages, the paper added.
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Chi Mei Communication Systems lands ultra-low cost handset orders from Motorola, says paper

14 Dec, 2007

Chi Mei Communication Systems (CMCS), an affiliate of Hong Kong-based Foxconn International Holdings (FIH), has landed a large-quantity order for ultra-low cost handsets from Motorola, according to a Chinese-language Commercial Times report.
CMCS is expected to begin delivering the ultra-low cost handsets to Motorola in the second quarter of 2008, with total shipments likely to reach 30 million units, said the paper, which also noted that the handsets will initially target the market in India.

They are also doing good with Nokia. They are building capacity to ensure cost advantages. Also, they have windows mobile....

Other news.

1. Foxconn International Holdings (FIH) has taken over the CDMA team of Nokia located in San Diego, USA

2. FIH to build new handset plant in Guangdong

3. Handset start-up Mobinnova lands smartphone orders from i-mate