Apple Partner Hon Hai’s Profit Tops Estimates on New iPhones
(Bloomberg) -- Key iPhone assembler Hon Hai Precision Industry Co. posted earnings that topped analysts’ estimates on strong demand for fresh versions of the Apple Inc. handset, but warned that sales will decline this quarter because of persistent chip shortages.
Net income for the third quarter ending in September was NT$37 billion ($1.3 billion), the Taiwanese company said Friday. Analysts had estimated NT$32.4 billion on average. Sales for the period reached a record NT$1.4 trillion based on previously reported numbers.
Electronics manufacturers continue to benefit from the pandemic, which has fueled demand from homebound consumers. While the shortage of semiconductors keeps curtailing companies’ production capacity, Apple Chief Executive Officer Tim Cook said late last month that demand for the U.S. giant’s offerings is “very robust.”
Hon Hai’s sales growth “indicates stronger-than-expected demand for its semiconductors, mainly power and analog chips, and iPhone assembly service,” Bloomberg Intelligence analyst Charles Shum said in a Oct. 20 note.
Hon Hai predicted that its business will shrink this quarter from a year earlier -- led by declines in consumer electronics and computing -- as it continues to be affected by the chip crunch. Component shortages are set to last until the second half of next year, Hon Hai Chairman Young Liu said on a conference call Friday. Apple said last month it could lose more than $6 billion in sales this quarter because of supply chain issues.
Lockdowns in Vietnam have affected the supply chain, but the situation in the Southeast Asian country has begun to improve, Liu has said.
Hon Hai has been working hard to cut its reliance on Apple’s gadget assembly orders. It is trying to branch out to the emerging electric vehicle market, although Liu has said the automotive business will not begin to make meaningful contribution to the company’s revenue before 2023.
In its most notable EV-related move to date, Hon Hai agreed in October to acquire Lordstown Motors Corp.’s pickup manufacturing facility in Ohio as part of a $280 million deal. Soon after, the Taiwanese company unveiled first electric cars, a move boosting its credentials as a serious contender for Apple’s secretive automotive project.
Hon Hai said Friday it will start assembling Lordstown Motors’ Endurance pickup truck in the second half of next year, which is later than initially planned. Also during the second half, it plans to start constructing an EV plant in Thailand and launch a project in the Middle East focusing on electric-car software.
The company has a manufacturing deal with Fisker Inc. and a partnership with Thailand’s state-owned conglomerate PTT Pcl. It’s also struck pacts with Stellantis NV and Zhejiang Geely Holding.
©2021 Bloomberg L.P.