Foxconn may sell own branded accessories after Apple profits dip
With most of its profits believed to come from manufacturing Apple products, Foxconn plans to diversify its business, and is even planning to build, brand and directly sell its own electronics accessories compatible with devices like the iPhone and iPad.
Details about Foxconn's internal plans were shared with The Wall Street Journal by an unnamed executive at the company, which is also known as Hon Hai Precision Industry Co. According to a report published Monday, Foxconn is "aggressively" moving to add new clients and expand its business to reduce reliance on Apple.
Apple CEO Tim Cook touring an iPhone production line at a Foxconn plant in Zhengzhou, China.
Last quarter, Foxconn saw its revenue fall 19 percent in the first quarter of 2013, though net profit was up 2.9 percent. The revenue reduction coincided with Apple's first year over year profit decline in a decade.
Market watchers suspect that Apple is responsible for about 50 percent of Foxconn's revenue, though the company doesn't offer such numbers in detail.
But according to the unnamed executive, Foxconn plans to be able to supply all of the components for devices it assembles. Currently, customers like Apple must buy their components from multiple vendors, and provide them to Foxconn to have the final product assembled.
Beyond its ambitious manufacturing plans, Foxconn is also reportedly interested in selling its own branded accessories, including cables, headphones and keyboards that would be compatible with Apple products such as the iPhone and iPad.
Foxconn may even sell its own electronics and those of its partners directly, Monday's report said. The company is said to be investigating online retail operations, because those sales could generate higher margins than its current manufacturing efforts.
Foxconn's efforts to lessen its reliance on Apple's iPhone for its profits were first detailed earlier this month by The New York Times, though Monday's latest report offers more specifics on what those plans may entail. The company has also shown increased interest in televisions, and bought a significant stake in LCD maker Sharp as part of those plans.
Apple's declining profits come as the company has yet to release any major products thus far in 2013. CEO Tim Cook signaled in April that major new products will be arriving this fall and throughout 2014.
In the interim, Apple is expected to introduce new MacBook models at its annual Worldwide Developers Conference in June. In particular, MacBook Air inventory has been drying up ahead of the company's planned June 10 keynote. But the Mac has become an increasingly small part of Apple's business, as the high-margin iPhone and iPad have come to represent the lion's share of the company's revenue.
Details about Foxconn's internal plans were shared with The Wall Street Journal by an unnamed executive at the company, which is also known as Hon Hai Precision Industry Co. According to a report published Monday, Foxconn is "aggressively" moving to add new clients and expand its business to reduce reliance on Apple.
Apple CEO Tim Cook touring an iPhone production line at a Foxconn plant in Zhengzhou, China.
Last quarter, Foxconn saw its revenue fall 19 percent in the first quarter of 2013, though net profit was up 2.9 percent. The revenue reduction coincided with Apple's first year over year profit decline in a decade.
Market watchers suspect that Apple is responsible for about 50 percent of Foxconn's revenue, though the company doesn't offer such numbers in detail.
But according to the unnamed executive, Foxconn plans to be able to supply all of the components for devices it assembles. Currently, customers like Apple must buy their components from multiple vendors, and provide them to Foxconn to have the final product assembled.
Beyond its ambitious manufacturing plans, Foxconn is also reportedly interested in selling its own branded accessories, including cables, headphones and keyboards that would be compatible with Apple products such as the iPhone and iPad.
Foxconn may even sell its own electronics and those of its partners directly, Monday's report said. The company is said to be investigating online retail operations, because those sales could generate higher margins than its current manufacturing efforts.
Foxconn's efforts to lessen its reliance on Apple's iPhone for its profits were first detailed earlier this month by The New York Times, though Monday's latest report offers more specifics on what those plans may entail. The company has also shown increased interest in televisions, and bought a significant stake in LCD maker Sharp as part of those plans.
Apple's declining profits come as the company has yet to release any major products thus far in 2013. CEO Tim Cook signaled in April that major new products will be arriving this fall and throughout 2014.
In the interim, Apple is expected to introduce new MacBook models at its annual Worldwide Developers Conference in June. In particular, MacBook Air inventory has been drying up ahead of the company's planned June 10 keynote. But the Mac has become an increasingly small part of Apple's business, as the high-margin iPhone and iPad have come to represent the lion's share of the company's revenue.
Comments
Isn't this a seasonal transition when people know Apple is about to release new products so they simply just don't buy.....
Quote:
Originally Posted by geekdad
Doesn't demand always slow before a big expected Apple product release?
Isn't this a seasonal transition when people know Apple is about to release new products so they simply just don't buy.....
So you're saying that Apple is going to release something within the next month?
Quote:
Originally Posted by island hermit
So you're saying that Apple is going to release something within the next month?
WWDC on June 10th....new products....start the summer cycle of product releases/announcements. You might even see something in the fall too in time for the holiday shopping season...... I hope you were being sarcastic....
Quote:
Originally Posted by geekdad
Doesn't demand always slow before a big expected Apple product release?
Isn't this a seasonal transition when people know Apple is about to release new products so they simply just don't buy.....
That's not the point, apple isn't going to release anything and that's the wise thing to do.
The problem is that tech blogs are talking about lower demand (apple is doomed) when Apple is using other companies like pegatron, TSMC (etc) more and more instead of relying exclusively on 1 manufacturer.
Quote:
Originally Posted by geekdad
WWDC on June 10th....new products....start the summer cycle of product releases/announcements. You might even see something in the fall too in time for the holiday shopping season...... I hope you were being sarcastic....
Do they normally announce products at WWDC?
I thought Apple was only releasing in the fall? Why would it be slowing down already for a product releases in the fall?
Quote:
Originally Posted by pedromartins
That's not the point, apple isn't going to release anything and that's the wise thing to do.
The problem is that tech blogs are talking about lower demand (apple is doomed) when Apple is using other companies like pegatron, TSMC (etc) more and more instead of relying exclusively on 1 manufacturer.
I see your point........Yes...Apple does use other suppliers. If orders for Foxconn as slowing then maybe Apple just shifted order to another one of their suppliers. I get that. But the point i was making is people who buy Apple usually wait to buy until after rumored product launches are over. They either buy the new product released or buy the previous product that might be available at a reduced price.
Quote:
Originally Posted by Rogifan
I hate when AI runs with the meme that everything an Apple supplier does or is rumored to be doing is because of falling demand from Apple products.
The article didn't say "falling demand". It talked about falling profits, which is not always the same thing. The iPad mini seems to be in demand, yet it makes less profit than the original iPad.
That said, Hon Hai (Foxconn's parent) has had falling profit margins during the past half decade, and it's true that analysts often tie their fate together with Apple's. E.g. in charts like this one:
Although, look at the HonHai trend downward just before the "IPhone debuts" line. It sure looks like Apple caused HonHai profits to level out for a while.
Quote:
Originally Posted by island hermit
Do they normally announce products at WWDC?
I thought Apple was only releasing in the fall? Why would it be slowing down already for a product releases in the fall?
Yes they do......
http://appleinsider.com/articles/13/05/24/haswell-chips-could-bring-50-more-battery-life-to-apples-next-gen-macbooks
http://appleinsider.com/articles/13/05/08/traffic-from-apples-unannounced-ios-7-spikes-ahead-of-wwdc
http://appleinsider.com/topic/iPhone+5S
I can't see Apple allowing Foxconn to abuse their position to bring products to market quicker (or even on the same day Apple releases a new device).
Quote:
Originally Posted by Ireland
More iPads and iPhones selling per quarter: clearly must be a sign of slowing demand.
Apple product demand is falling down despite the rise. You need to consider the market growth relative to Apple products. Of course , with pink glasses, I understand that some people prefer to see a rise. But in reality, its a decline.
Thankfully, the unit rise combine with the margins decline manage to keep EPS flat. But the balance is very fragile. I am afraid we will see significant EPS decline this quater. There will be YoY unit declines, but margins should improved a bit since its been a while since products rollout. We will see.
IF Apple can keep its EPS this quater and manage to launch new products in the next, we will be out of the woods for a few months.
Quote:
Originally Posted by EricTheHalfBee
I wonder what Apple thinks about this. Since Foxconn makes devices they would have a head start on other accessory makers (think cases, for example).
I can't see Apple allowing Foxconn to abuse their position to bring products to market quicker (or even on the same day Apple releases a new device).
imo, I am hoping Foxconn doesnt turn into Samsung #2 and start rolling out there own products...
Quote:
Originally Posted by geekdad
Yes they do......
http://appleinsider.com/articles/13/05/24/haswell-chips-could-bring-50-more-battery-life-to-apples-next-gen-macbooks
http://appleinsider.com/articles/13/05/08/traffic-from-apples-unannounced-ios-7-spikes-ahead-of-wwdc
http://appleinsider.com/topic/iPhone+5S
Foxconn supplies very few Macbooks... and the article specifically states iPads and iPhones... which is what I was talking about as well.
It sounds like you are saying, but haven't said specifically yet, that the 5S will be announced in June.
If there is any truth to this, they are the new Samsung! They start by assembling for Apple then steal their technologies and start making competing devices. It's a good thing Apple is spreading out its supply chain and manufacturing facilities. Apple should use the $100+ billion they have over there to start building their own component manufacturing and assembly plants. China and Korea have shown at every turn they are completely untrustworthy (crooks). Wake up Apple!
Quote:
Originally Posted by island hermit
So you're saying that Apple is going to release something within the next month?
Its going to release new macs for starters. But I am hoping for a surprise on the hardware side. The Apple stock needs it badly.
Quote:
Originally Posted by herbapou
Its going to release new macs for starters. But I am hoping for a surprise on the hardware side. Apple needs it badly.
I was trying to stay on point... (iPad and iPhone)
I keep thinking that Apple is going to announce something early... but I also thought it was going to announce something by the end of March... so, yes, I too think Apple needs it badly.
Originally Posted by island hermit
Do they normally announce products at WWDC?
I thought Apple was only releasing in the fall?
If you had never heard of Apple Computer Inc. before last October, you would think that.
But that's not the case with you. So why would you even SAY THIS?!