Foxconn Posts Record Profit Despite First-Ever Sales Decline

For the first time since it went public in 1991, Foxconn reported a year-on-year decline in revenue in 2016 that it attributed to weaker demand from Apple, according to a new report from the Wall Street Journal.

The company’s revenue fell 2.81 percent in the year despite a 9.76 percent year-on-year increase in December. Foxconn’s decline in annual revenue correlated to Apple’s first decline in revenue since 2001, and Apple accounts for over 50 percent of Foxconn’s annual revenue.

Despite the revenue drop, Foxconn Technology Group, also known as Hon Hai Precision Industry, posted record net profit for the 2016 full year through tighter cost controls. For the full year, net profit reached 148.66 billion New Taiwan dollars ($4.9 billion USD), an increase of 1.2% on the year, while revenue dropped 2.8% to NT$4.35 trillion.

The profit was likely to have been boosted by solid bookings for Apple’s bigger-sized iPhone 7 models, which Foxconn assembles, analysts said.

“The growth came mainly from current iPhone products. New iPhone production will continue to drive Hon Hai’s sales when it starts to make the devices in coming quarters,” said Annabelle Hsu, a supply chain analyst for IDC based in Taipei. “Also, Hon Hai’s investments in other areas are starting to pay back. The business of robots and robotic arms is doing very well.”

Apple shipped an unprecedented 78.3 million iPhones during the December quarter, despite its latest device representing a modest update on its predecessor. Optimism around Apple’s iPhone for 2017 – the 10th anniversary of the iconic device – has driven the Taiwanese company’s stock close to a decade-high.

Industry reports indicate that the Apple supply chain will begin delivering parts and components for the next-generation iPhone earlier than in previous years, with shipments beginning at the end of the first quarter this year. The iPhone 8 is expected to launch in September.