Stefan Mileschin

Soaring operating costs and poor iPhone X sales

Foxconn posted second-quarter net profit well below expectations and blamed a rise in component costs and unsold inventory.

The company reported net profit of $567.25 million - 20 per cent short of analyst expectations and slightly below the year-earlier results.

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 three percent to 350 million units in the April-June quarter compared with a year earlier, market research firm Strategy Analytics says.

The company’s report also illustrates its moves to diversify by pushing into new areas such as display screens - it bought Sharp Corp in 2016 - autonomous car startups and investments in cancer research.

Sadly, Foxconn earns most of its profits from manufacturing smartphones for Apple and from Foxconn Industrial Internet, a unit that makes networking equipment and smartphone casings, among other things. This means that if Apple reduces sales, Foxconn suffers rather badly.

Foxconn absorbed some expenses this quarter related to Sharp’s planned acquisition of Toshiba’s PC business, as well as development costs from setting up a factory in the United States, and taking Foxconn Industrial public in June.

https://fudzilla.com/news/mobile/469...below-forecast