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Taiwan's Hon Hai Precision Industry, the manufacturing unit within Apple supplier Foxconn, has posted record-breaking quarterly and annual profits. Industry observers say the company's success is directly tied Apple's success with the iPhone 5 and other gadgets.
Computerworld's Michael Han reported, "Foxconn's Hon Hai Precision Industry posted record annual profits last year, a sign that production of Apple products remains strong despite heightened competition from rival electronics vendors. Hon Hai Precision, the central manufacturing company within Foxconn Technology Group, said on Monday its net income for 2012 reached $3.2 billion, a 16% increase from the year before. Net sales for the year jumped over 13%."
Bloomberg BusinessWeek's Tim Culpan added, "Hon Hai Precision Industry Co. (2317), the world’s largest contract manufacturer of electronics, posted record quarterly profit after it boosted production efficiency and output of Apple Inc. (AAPL) iPhones and iPads. Fourth-quarter net income climbed 5.6 percent to NT$37 billion ($1.2 billion), according to data compiled by Bloomberg based on full-year results published yesterday. That’s ahead of the NT$35.9 billion average of 14 analyst estimates compiled by Bloomberg."
The Wall Street Journal's Lorraine Luk observed, "Analysts said the latest quarterly numbers were better than expected, but Hon Hai’s earnings momentum could slow in the first half this year on uncertainty over Apple’s sales outlook, before rebounding in the second half with the launch of new iPhones and iPads. 'The fourth quarter was the first quarter for the mass ramp-up of the iPhone 5, and the iPhone business typically carries higher margin than Hon Hai’s corporate average. We note that the iPhone contributed to about 25%-30% of Hon Hai’s 4Q top-line, which is a historical peak as well,' said HSBC analyst Jenny Lai."
Sarah Mishkin with The Financial Times noted, "A major concern now, however, is how much Foxconn’s sales dip in the first half of this year. While Hon Hai’s size and experience make it likely to be tapped for the bulk of Apple’s manufacturing, Apple’s sales are expected to slow unless it launches new iPhones, including potentially a lower-cost one, toward the end of the year. Falling sales of personal computers are expected to take a further bite as Hon Hai also works for major PC companies including Hewlett-Packard and Dell."