The world’s largest manufacturing services provider Hon Hai Precision, also known as Foxconn Technology, reported that its March revenue declined by 27 percent from the prior year-level to roughly $8.71 billion. Wall Street analysts attributed the drop to slowing demand for iPhones and iPads brands as Apple Inc. is Foxconn’s biggest customer.
Daiwa Capital Markets analyst Birdy Lu said Hon Hai’s iPhone shipments likely dropped to 26 million units in the first quarter from 42 million units in the fourth quarter last year, while its iPad and iPad mini production likely fell to 10 million units from 18 million units in the same period, Bloomberg News reported.
“For the 2Q outlook, our recent checks indicate that iPhone shipments could decline by 0 to 5 percent while iPad shipments might decline by 5 percent to 10 percent,” said Lu.
While consumers continue to be drawn to Apple’s gadgets, its competitors haven’t been standing still. Microsoft reportedly is readying a 7-inch Surface tablet. Samsung has launched the new version of its Galaxy S phone running the Android operating system and has its own line of tablets to compete with the iPad. HTC Corp. and smaller Chinese players also are seeking to lure away iPhone users.
The fact that Apple sold a record number of iPhone and iPads in the fiscal quarter ended Dec. 29 also makes it harder for the U.S. company to beat the market’s hefty expectations for its sales. The January- March period is traditionally a slow sales season compared to the holiday season in October to December. Customers also tend to delay purchases ahead of the launch of new Apple products.
Lu said Hon Hai’s other contract manufacturing business—PCs, networking and consumer electronics—should recover slightly due to seasonal factors. “As such, we estimate Hon Hai’s 2Q sales could be in the similar level to 1Q.”