TAIPEI: Foxconn posted second-quarter net profit well below expectations as a rise in component costs and unsold inventory weighed on the performance of the Apple supplier and world’s top contract electronics maker, analysts said.
The company, formally known as Hon Hai Precision Industry Co. Ltd, reported net profit of T$17.49 billion ($567.25 million) late on Monday, 20 percent short of analyst expectations and slightly below the year-earlier results. Foxconn shares fell more than 3 percent on Tuesday.
Analysts said the results reflected concerns about a loss of momentum in global smartphone sales. Last week, Foxconn unit FIH Mobile Ltd. posted a wider first-half loss and acknowledged that it faced a high risk of saturation in the smartphone market.
Foxconn’s results showed that its gross margin narrowed in the second-quarter in part owing to the cost of carrying unsold inventory of the iPhone X. Overall global smartphone shipments fell 3 percent to 350 million units in the April-June quarter compared with a year earlier, market research firm Strategy Analytics says.
However, Vincent Chen, an analyst at Yuanta Research, predicted a brighter outlook projected by Apple would benefit Foxconn and boost its margins in the third quarter.
Apple has forecast above-consensus revenue for later in the year, when it typically launches new iPhone models. Reports suggest these models will use OLED screens, which can display colors more vividly.
“We expect Hon Hai to be the main assembler of OLED version new iPhones and we believe the OLED iPhone model will see better demand in 2H18F,” Chen said in a research note.
The company’s report also illustrates its moves to diversify by pushing into new areas such as display screens — it bought Sharp Corp. earlier this year — autonomous car startups and investments in cancer research.
Still, Foxconn earns most of its profits from manufacturing smartphones for Apple and other brands and from Foxconn Industrial Internet, a unit that makes networking equipment and smartphone casings, among other things.
“Investment in factory automation and component price hikes capped gross margin,” said Fubon Research analyst Arthur Liao. Foxconn’s operating costs jumped 18.8 percent in the quarter.
Liao noted that Foxconn absorbed some expenses related to the Sharp acquisition this quarter, as well as development costs from setting up a factory in the US, and taking Foxconn Industrial public in June.
Apple contractor Foxconn posts below-forecast profit on soaring operating costs
Apple contractor Foxconn posts below-forecast profit on soaring operating costs
Up to $600m in additional tariffs on Saudi exports to the US
RIYADH: Gulf exports have become targets of US President Donald Trump’s tariffs, which he raised from 10 percent to 15 percent on all countries.
The increase comes after the US Supreme Court ruled that the legal basis Trump had used to impose earlier tariffs was unlawful.
Previously, Gulf countries were among the few that had not raised their tariffs above 10 percent, while many other countries, most notably China, had already been subject to higher tariffs. However, with this latest increase, the Gulf states will be among those affected.
According to the financial analysis unit of Al-Eqtisadiah newspaper, Gulf exports to the US in 2024 amounted to about $26.2 billion, with Saudi Arabia accounting for roughly half of that, at $12.7 billion. These exports are subject to potential additional tariffs of SR637 million ($169 million).
It is likely that tariffs on Saudi exports will grow from $1.3 billion annually to $1.9 billion, a rise of 50 percent, following Trump’s recent increase.
Customs duties on Gulf exports will also increase, from $2.6 billion annually to $3.9 billion.
In 2024, Gulf exports are distributed as follows: $7.5 billion from the UAE, $1.8 billion from Qatar, and $1.6 billion from Kuwait, as well as $1.3 billion from Oman, and finally, $1.2 billion from Bahrain.
Gulf trade with the US in 2024 reached approximately $86 billion, comprised of $26.2 billion in exports and approximately $60 billion in imports, resulting in a Gulf trade deficit of $33.5 billion.
Trump responds to Supreme Court ruling
US President Donald Trump raised the global tariffs from 10 percent to 15 percent in response to the US Supreme Court ruling that his previous tariff implementation mechanism was unlawful.
Trump said in a post on his Truth Social account today: “As President of the US, I will, effective immediately, raise the global tariffs imposed on countries that have been taking advantage of the US for decades with impunity (until I took over!) to the legally permitted and tested level of 15 percent.”
Hours after the Supreme Court ruling on Feb. 20, Trump imposed a 10 percent global tariff on foreign goods, a move aimed at maintaining his trade agenda.
Trump had expressed his displeasure with the Supreme Court’s decision to overturn the tariffs imposed by his administration, asserting that the ruling would not restrict him. He vowed to impose tariffs far exceeding those struck down by the court, indicating that he had stronger alternatives to tariffs, raising questions about his future trade strategy.
The US Supreme Court struck down Trump’s sweeping global tariffs, undermining his signature economic policy and inflicting his biggest legal defeat since returning to the White House.
By a six-three vote, the court ruled that Trump exceeded his authority by invoking the federal emergency powers law to impose his reciprocal tariffs worldwide, in addition to targeted import duties that the administration claims are intended to combat fentanyl smuggling.
