Sharp + Belkin Owners Falter Due To iPhone Sales Slump
Foxconn, the Company that owns Sharp and Belkin and is the Company responsible for the production of billions of dollars worth of Apple products has reported a major fall in profits as iPhone sales slump.
The Taiwanese Company reported a 17.7 per cent year-on-year drop in profits in the first quarter after several months of weak smartphone growth.
The Taipei-listed company said net profit was A$915M for the first three months of 2019, which below a consensus estimates.
In an effort to increase sales and profits Foxconn is moving to reenter the US TV market with their Sharp brand, they are also set to “significantly” expand Sharp’s presence in the appliances market.
Last year Foxconn forked out US$866 million in cash to buy Belkin which was merged with Foxconn Interconnect Technology (FIT), a Hong Kong-based Foxconn subsidiary that makes cables, antennas, and connectors.
Belkin now operates separately under current CEO and cofounder Chet Pipkin, selling popular power, connectivity, and protective accessories under its own name, as well as continuing to offer WeMo, Linksys, and Phyn gear.
Foxconn, chairman Terry Gou recently announced that he wants to run for Taiwan’s presidency, did not explain what had led to the recent fall in Foxconn profits.
Analysts claim that Foxconn has been hit harder than most other Apple partners because as the largest assembler of the iPhone it is overly dependent on revenue from Apple, whose smartphones have struggled, especially in China.
It’s also tipped that profits could fall further following the expansion of the trade war between China and the USA.
Sales for the three months to March, though, rose 2.5 per cent from the same period a year earlier.
But the company’s operating margin shrank from 3.55 per cent in the fourth quarter of last year to 1.5 per cent in the first quarter of 2019.
This was driven by the US-China trade war, rising labour costs and diminishing investment incentives in China.
Several major global Companies such as Samsung are now setting up production lines in India as opposed to China.
Foxconn is ramping up capacity in India and looking at Vietnam, analysts said .
According to observers the group had less leeway to relocate operations away from China because of its heavy dependence on iPhones.
While the devices of some rival brands are assembled by glueing, many parts of the iPhone need to be put together with tiny screws, an operation that robots are largely unable to perform.
No other country can offer the hundreds of thousands of migrant workers Foxconn uses to run its factories in China.
This iPhone-induced heavy reliance on human labour and on China was taking a toll on profitability, analysts said.
Foxconn said on Friday it planned to restructure its board of directors to include seven new members. Mr Gou and Lu Fang-ming, deputy chairman and head of Asia-Pacific Telecom, would retain their seats.