By Lorraine Luk
HONG KONG-- Hon Hai Precision Industry Co., a major assembler of
Apple Inc.'s iPhones, reported its highest earnings growth in five
years, mirroring the blockbuster earnings report from the U.S
technology giant in its fiscal first quarter.
Hon Hai, also known as Foxconn Technology Group, said its net
profit last year rose 22% from a year earlier, a sharp increase
from 13% in 2013 and 1.9% five years ago.
The world's largest contract manufacturer for electronics by
revenue derives almost half of its revenue from its major client,
Apple. The Cupertino, Calif. company sold 74.5 million iPhones in
its fiscal first quarter ended Dec. 27, up 46% from a year earlier,
lifting its profit to a record $18 billion.
But the Taiwan-based manufacturer has been seeking new growth
drivers beyond contract manufacturing in recent years as
competition for Apple's business is intensifying and wages in China
continue to increase. Hon Hai has been expanding into the
e-commerce market with its own online retail platform in China. It
has also branched out into the telecom services market by investing
in its own high-speed mobile network in Taiwan. But analysts are
skeptical of the company's diversification efforts given its lack
of experience in those new markets.
Hon Hai said its net profit in 2014 rose to 130.53 billion new
Taiwan dollars ($4.17 billion) from NT$106.69 billion a year
earlier. Revenue rose 6.5% to 4.21 trillion new Taiwan dollars from
NT$3.95 trillion a year earlier. The company didn't disclose
quarterly earnings.
Hon Hai also got a boost from strong orders from fast-growing
Chinese smartphone makers including Xiaomi Corp and Huawei
Technologies Co., which contributed to the jump in earnings at its
handset making unit, FIH Mobile Ltd. Hon Hai has a 66% stake in the
unit, which assembles phones for handset brands other than Apple.
FIH Mobile said earlier this month its full-year net profit more
than doubled to US$169 million last year, compared with US$77
million in 2013.
Upstart Xiaomi, which recently became one of the world's most
valuable technology startups, said earlier its smartphone shipments
more than tripled to 61.1 million units in 2014. The company was
the world's fifth-largest smartphone maker in the fourth quarter,
with a 4.4% share of the market, according to market-research firm
IDC.
Since Hon Hai's fortunes largely hinge on Apple's iPhone sales,
a major uncertainty is whether Apple can continue to excite
consumers with its new iPhones later this year given rising
competition in the global smartphone market, analysts say.
Apple plans to add sensors to detect how hard a user is pressing
on a screen to its next iPhones but it isn't changing the size and
resolution of the displays in the 4.7-inch and 5.5-inch iPhones,
people familiar with the matter told The Wall Street Journal
earlier this month.
Write to Lorraine Luk at lorraine.luk@wsj.com
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