HONG KONG--Strong demand for large-screen iPhones helped Apple
Inc.'s major assembler, Hon Hai Precision Industry Co., achieve its
highest first-quarter profit growth in a decade.
Hon Hai Friday reported a 56% rise from a year earlier in its
first-quarter earnings. With investors clamoring for higher
returns, it also roughly doubled its dividend payout.
The earnings rise beat the 33% the company reached in the fourth
quarter--usually a peak season, as consumers tend to spend more on
gadgets during the year-end holiday season.
Hon Hai, also known as Foxconn Technology Group, increased its
2014 dividend to NT$3.80 a share from NT$1.80 (to 12 U.S. cents
from six cents). That would represent 43% of its 2014 profit, a
significant increase from the 22% distributed in 2013, though lower
than the 60% average for Taiwan technology companies. BlackRock
Inc., the world's biggest asset manager, last year privately called
on Hon Hai Chairman Terry Gou to increase the dividend by tapping
the company's cash pile of roughly $22 billion, The Wall Street
Journal reported in December.
Hon Hai, which derives almost half of its revenue from Apple,
has been seeking growth drivers beyond contract manufacturing as
competition for Apple's orders intensify and wages in China--where
it does its manufacturing--continue to rise. The Taiwan-based
company has expanded into e-commerce with its own online retail
platform in China and branched out into health care by teaming up
with U.S. medical device companies. 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 for the three months ended March 31
rose to 30.39 billion new Taiwan dollars ($998 million), from
NT$19.54 billion a year earlier. Revenue rose 15% to NT$1.01
trillion from NT$883.48 billion. The bottom line got a boost from a
40% jump in the number of iPhones sold by Apple in its fiscal
second quarter ended March 28.
Fast-growing Chinese smartphone makers including Xiaomi Corp.
and Huawei Technologies Co. also helped. Hon Hai's 66%-owned unit
FIH Mobile Ltd., which assembles non-Apple phones, reported in
March its full-year net profit more than doubled to US$169 million
from US$77 million.
Upstart Xiaomi, which recently became the world's most valuable
technology startup, said earlier its smartphone shipments more than
tripled to 61.1 million units in 2014. Measured by shipments, it
was No. 2 in China in the first quarter, with a 13.7% share of the
world's largest smartphone market, according to market-research
firm IDC.
Analysts said the strength of Hon Hai's earnings growth is
likely to extend into the second quarter, given iPhone sales
momentum. Hon Hai reported last week that its April revenue rose
20% to NT$352 billion.
"A lot of consumers are still in the process of replacing their
old phones with large-screen iPhones," said Kylie Huang, an analyst
at Daiwa Capital Markets. "I also expect the next-generation
iPhones slated for launch in the fall will be even more popular
than the current versions because of some exciting new
features."
The next iPhones' screens will add sensors to detect how hard a
user is pressing, people familiar with the matter told The Wall
Street Journal in March, but the size and resolution of the
4.7-inch and 5.5-inch displays won't be changed.
Write to Lorraine Luk at lorraine.luk@wsj.com
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