Foxconn’s profits rise sharply on new Apple product launches

By , Oct 31, 2012

Shares of Foxconn, the world’s largest contract manufacturer that assembles Apple’s iPhone, iPad and a number of products for other big names in tech, posted its third-quarter earnings yesterday. The results are stronger than expected and attributed to high demand for the iPhone 5, warm iPad mini reception and the incoming new iMac, which arrives in November and is already predicted to be in short supply.

On the other hand, investors are also concerned over Apple’s long-term growth prospect and Foxconn becoming too dependent on the Cupertino, California designer of shiny gadgets…

Reuters reports that Foxconn late yesterday reported nine-month profit of T$57.8 billion, or 24 percent higher than the year-ago period. Net profit in the September quarter when Apple launched new products was up 58 percent from a year earlier and an astounding 140 percent higher sequentially.

Foxconn started mass production for the iPhone 5 and iPad mini in late August, the news gathering organization reports.

Barclays Capital’s Kirk Yang expects fourth-quarter sales to grow by 14 percent annually “due to strong Apple product shipments”, as yield rates of the iPhone 5 and iPad mini improve.

Foxconn’s margin apparently improved because Apple absorbed some of the costs associated with improving conditions at its plants and advancing quality control in manufacturing.

While neither Apple nor Foxconn has said what the cost-sharing arrangements, if any, are between the two companies, some analysts assumed that Apple is paying higher fees for iPhone 5 and also is covering part of the cost of rising wages.

And according to The Wall Street Journal, Foxconn is still “grappling with making enough iPhones” going forward while ISI Group analyst Brian Marshall warned that “there are no secrets anymore at Apple”, which could affect sales because would-be buyers are no longer kept on the edge of their seats ahead of product announcements.

Unfortunately, he’s right about the secrecy thingie.

Remember, Cook publicly insisted five months ago that Apple had doubled-down on secrecy. “We’re going to double down on secrecy on products”, Cook told journalists Walt Mossberg and Kara Swisher during his AllThingsD talk late-May. “I’m very serious. I wanna double down on this”.

Not sure what doubling-down exactly took place at Apple, but the company over the past few months has learned the hard way that keeping a tight lid on projects has become nearly impossible in the post-Jobs era.

According to one unnamed Apple employee, the company did put in place new security practices that are however “targeted at making sure U.S. employees don’t leak stuff”. The problem is, everything comes out of China now and with Cook no longer in tight control of Apple’s supply chain on a day-to-day basis, something had to give.

Maybe Monday’s executive shake-up will help with that, what do you think?

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  • CollegiateLad

    I can’t wait to see what the holiday quarter will produce. I’m betting Apple will shatter the $52 billion projection. Just north of $55 billion maybe?