May 11, 2017 11:10 pm JST

Foxconn sales and profits inch forward in Q1

Shares gain over 30% in past six months on hopes for new iPhone range

DEBBY WU, Nikkei staff writer

Foxconn Chairman Terry Gou talks to reporters as he exits the White House following a second day of meetings in Washington on April 28. © Reuters

TAIPEI -- Key iPhone assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, on Thursday reported an increase in both sales and profits in the quarter ended in March.

Net profit was 28.16 billion New Taiwan dollars ($933 million), up 2.14% year-over-year, on revenues 1.78% ahead at NT$975.04 billion. The company said it will pay a cash dividend of NT$4.5 per share this year.

Apple accounts for more than 50% of Foxconn's total revenue.

Shares in Hon Hai closed flat ahead of earnings on Thursday. The stock has gained 31% over the past six months on high expectations for the iPhone's 10th anniversary range, which will feature a handset sporting a slightly curved organic light-emitting diode (OLED) screen and glass body.

Analysts expect Foxconn to virtually monopolize orders for the OLED iPhone.

"The generous cash dividend should be able to attract long-term investors," said Vincent Chen at Yuanta Investment Consulting. "Meanwhile, Foxconn's full-year results will depend on new iPhone shipments in the second half and whether it will be able to keep costs down faced with rising wages in China."

The company has been thrust into the limelight in recent months, wooed by senior officials in both China and the U.S., as Beijing and Washington appear to be placing growing emphasis on manufacturing as a key means of creating jobs and boosting their own economies.

Over the past two weeks, Foxconn Chairman Terry Gou has met top American and Chinese leaders to discuss the company's operations and business plans.

White House visit

The Taiwanese tycoon visited the White House on two consecutive days at the end of April to discuss details of his investment proposals with senior officials, including U.S. President Donald Trump, although Gou did not offer many details afterwards. Sources have said that Gou is likely to set up an advanced panel facility in the U.S., although Foxconn is still discussing details with officials.

On May 9, Gou gave Chinese Premier Li Keqiang a tour of Foxconn's key iPhone production facility in the central Chinese city of Zhengzhou.

"We hope that Foxconn can locate more of its advanced research and development and all of the supply chain resources here," Li told Gou during their meeting, according to a statement on the State Council's official website.

Faced with razor-thin margins making devices for others, Foxconn has been looking to diversify its business interests, including growing its own brand.

Last year, it acquired the Japanese electronics conglomerate Sharp Corp. Now it is trying to expand into the semiconductor field by launching a bid for embattled Japanese conglomerate Toshiba's lucrative memory chip business.

Foxconn is reportedly the highest bidder, offering 3 trillion yen ($26.3 billion).

However, industry insiders have suggested that the Taiwanese company, with its huge operations in China and close ties with Beijing, is very unlikely to win the bid against the backdrop of Tokyo's determination to prevent sensitive semiconductor technology being leaked to the Chinese.

Foxconn is competing against several other chip companies and private equity funds, including U.S.-based Broadcom and Western Digital, and South Korea's SK Hynix. Tokyo-backed Innovation Network Corp. of Japan is collaborating with U.S. private equity group Kohlberg Kravis Roberts on a joint bid.

Asia300

Hon Hai Precision Industry Co., Ltd.

Taiwan

Market(Ticker): TAI(2317)
Sector:
Industry:
Electronic Technology
Computer Peripherals
Market cap(USD): 60,004.95M
Shares: 17,328.73M
Asia300

SK hynix, Inc.

South Korea

Market(Ticker): KRX(000660)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 36,447.29M
Shares: 728.00M

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