Foxconn ‘Cautious’ on Handset Market Conditions
Contract electronics manufacturer Foxconn warned Monday about “challenging economic conditions.” Apple’s main manufacturer of iPhones and iPads reported weaker results for the first half of this fiscal year ended June 30, and said it “remains cautious” about “handset market conditions."
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The company said on its website it “will continue to take actions on resources optimization and operation cost control” in the rest of 2012, and enhance “value-added offerings” for new customers. But Foxconn said “we still see tremendous challenges” to return to profitability this year.
Foxconn’s loss for the first six month of 2012 widened to $226 million, year-over-year, from $18 million. It was the company’s worst first-half loss to date, published reports said. Revenue tumbled 16.4 percent to $2.5 billion.
The company saw “major changes in the handset ecosystem” in the first half of 2012 that it said were “triggered by the end market volatility due to the European and global economic” slowdown and “the emergence of new service/applications centric business models” that resulted in its customers’ continued “struggle in their market share protection battle.” The “market dynamics shifted drastically and created tough challenges for some industry players,” as well as Foxconn, it said. The company didn’t name customers that were most impacted.
Despite Foxconn’s efforts to solicit new customers’ business and streamline its operations, “it was clear that our total capacity was still over our demand level,” it said. “In line with” consolidation of its major Chinese manufacturing capabilities at its northern sites by the end of 2011, “further consolidation continued” at its Shenzhen site with relocations of teams and business into northern sites to “counter continued business and market dynamics and challenges,” it said. Reorganization of its business operations into “smaller and responsive teams” continued, it said.
Foxconn also said it continued to “explore and develop” its smartphone original design manufacturer business with existing and new customers that it didn’t name. Foxconn said it remained the major supply chain partner for existing customers.
The company had a cash balance of $2 billion June 30 that it said was expected to be enough to finance its operations. External borrowings grew in the first half of 2012, primarily to meet operating cash demand, it said.
Foxconn had 75,487 employees June 30, down from 98,868 in 2011, it said. Staff costs incurred in the six months ended June 30 totaled $251 million, down from $272 million, it said.