Foxconn profits plummet 39% following iPhone X production woes

Posted:
in iPhone edited November 2017
Apple manufacturing partner Foxconn this week posted a 39 percent year-over-year decrease in net profit, losses that industry watchers attribute to the difficult-to-assemble iPhone X, which remains in limited supply.




Foxconn's earnings reflect its September quarter, when production of the iPhone X was ramping up but the handset was not yet shipping. Its profits fell to 21 billion New Taiwan dollars, or about $695.5 million U.S., according to The Wall Street Journal.

The year-over-year decline was greater than analysts had expected, with estimates pegging the quarter at about NT$35.6 billion.

Revenue, however, was about flat with the year prior, at NT$1.1 trillion.

Foxconn is Apple's assembly partner for the iPhone X, which officially launched on Nov. 3. New orders are scheduled to ship in 3 to 4 weeks, reflecting demand that continues to outstrip supply.

Apparent production issues are said to be the fault of the forward facing TrueDepth camera, which powers the Face ID biometric authentication system replacing Touch ID. The camera is said to be composed of two key parts dubbed "Romeo" and "Juliet," and "Romeo" parts are more difficult to manufacture, leading to an imbalance in supply.

Apple gave the iPhone X more lead time to allow Foxconn to ramp up production -- it launched six weeks after the iPhone 8 and iPhone 8 Plus. Given that iPhone X orders have been shipping sooner than advertised, there are some suggestions that Apple has addressed many of the manufacturing issues it faces, and those improvements at the supply chain level could be reflected in Foxconn's December quarter.

Comments

  • Reply 1 of 12
    Expect more manufacturers to have set backs as companies like Apple keep pushing for more advanced components to stay on top. 
    magman1979calijbdragonwatto_cobra
  • Reply 2 of 12
    maestro64maestro64 Posts: 4,336member
    Those numbers do not add up. If operation costs increase that much in the last few week of Q3 just for the iPhone X to impact the bottom line by 40%, that means they were taking a loss on every iPhone x they shipped. Foxconn operating margins are low double digits to single digit. There has to more going on then the iPhone being harder to assemble. Foxconn would not just eat this they would have pass it along to Apple especially if there was yield issue on parts as rumors have been saying.
    muthuk_vanalingamStrangeDaysjbdragonwatto_cobraphilboogiejony0
  • Reply 3 of 12
    gatorguygatorguy Posts: 19,400member
    maestro64 said:
    Those numbers do not add up. If operation costs increase that much in the last few week of Q3 just for the iPhone X to impact the bottom line by 40%, that means they were taking a loss on every iPhone x they shipped. Foxconn operating margins are low double digits to single digit. There has to more going on then the iPhone being harder to assemble. Foxconn would not just eat this they would have pass it along to Apple especially if there was yield issue on parts as rumors have been saying.
    I tend to agree with you. Foxconn sells Apple a completed iPhone (which is why it's considered a Chinese import). Apple sells Foxconn many (most?) of the components that go into building it. Doesn't seem like only one of the two would be taking all the hit for build problems. 
  • Reply 4 of 12
    spice-boy said:
    Expect more manufacturers to have set backs as companies like Apple keep pushing for more advanced components to stay on top. 
    I don’t think they expected demand for the X to be so elevated, and 8 muted.  

    The manufacturers were probably positioned to volume produce the 8, and it was expensive to switch to the X.

    This really isn’t that big a deal for Apple, besides delaying sales slightly as customers waited on the X.

  • Reply 5 of 12
    maestro64 said:
    Those numbers do not add up. If operation costs increase that much in the last few week of Q3 just for the iPhone X to impact the bottom line by 40%, that means they were taking a loss on every iPhone x they shipped. Foxconn operating margins are low double digits to single digit. There has to more going on then the iPhone being harder to assemble. Foxconn would not just eat this they would have pass it along to Apple especially if there was yield issue on parts as rumors have been saying.
    They probably did, since iPhoneX costs 1000 and not 650-700 as those models that Foxconn assembled prior to X model.
  • Reply 6 of 12
    Great illustration about how investors destroy companies. Everything must happen in a quarter. 
    watto_cobra
  • Reply 7 of 12
    asdasdasdasd Posts: 5,137member
    maestro64 said:
    Those numbers do not add up. If operation costs increase that much in the last few week of Q3 just for the iPhone X to impact the bottom line by 40%, that means they were taking a loss on every iPhone x they shipped. Foxconn operating margins are low double digits to single digit. There has to more going on then the iPhone being harder to assemble. Foxconn would not just eat this they would have pass it along to Apple especially if there was yield issue on parts as rumors have been saying.
    It’s quite possibly a penalty. 
  • Reply 8 of 12
    brucemcbrucemc Posts: 1,469member
    What, no Apple is Doomed?
    watto_cobra
  • Reply 9 of 12
    spice-boy said:
    Expect more manufacturers to have set backs as companies like Apple keep pushing for more advanced components to stay on top. 
    I don’t think they expected demand for the X to be so elevated, and 8 muted.  

    The manufacturers were probably positioned to volume produce the 8, and it was expensive to switch to the X.

    This really isn’t that big a deal for Apple, besides delaying sales slightly as customers waited on the X.

    #1."Apparent production issues are said to be the fault of the forward facing TrueDepth camera"
    What production problems?  The iPhone X shipped on time and in quantities greater than that flake Kuo said they would.

    #2. It is expensive to repurpose assembly lines, but Foxconn has not done that.  Foxconn simultaneously setup both iPhone 8 and iPhone X assembly lines to produce what Apple ordered a year ago.  Any adjustments to that configuration will be slight.

    #3. As in prior launches Foxconn produced, shipped and invoiced for everything that occurred in the period.  This year Apple's #1 iPhone did not ship in the period referenced, ergo Foxconn had not invoiced Apple for those units.  That amount represents a significant amount of revenue and profit that will be reflected in November's statements.

    This is a non-issue.  The market's reaction to it was led by uninformed retail investors selling, while institutional investors sat on their hands.  Tomorrow will be different as the institutions swoop in to pickup cheap shares.
    SpamSandwichwatto_cobramuthuk_vanalingam
  • Reply 10 of 12
    spice-boy said:
    Expect more manufacturers to have set backs as companies like Apple keep pushing for more advanced components to stay on top. 
    I don’t think they expected demand for the X to be so elevated, and 8 muted.  

    The manufacturers were probably positioned to volume produce the 8, and it was expensive to switch to the X.

    This really isn’t that big a deal for Apple, besides delaying sales slightly as customers waited on the X.

    #1."Apparent production issues are said to be the fault of the forward facing TrueDepth camera"
    What production problems?  The iPhone X shipped on time and in quantities greater than that flake Kuo said they would.

    #2. It is expensive to repurpose assembly lines, but Foxconn has not done that.  Foxconn simultaneously setup both iPhone 8 and iPhone X assembly lines to produce what Apple ordered a year ago.  Any adjustments to that configuration will be slight.

    #3. As in prior launches Foxconn produced, shipped and invoiced for everything that occurred in the period.  This year Apple's #1 iPhone did not ship in the period referenced, ergo Foxconn had not invoiced Apple for those units.  That amount represents a significant amount of revenue and profit that will be reflected in November's statements.

    This is a non-issue.  The market's reaction to it was led by uninformed retail investors selling, while institutional investors sat on their hands.  Tomorrow will be different as the institutions swoop in to pickup cheap shares.
    But your opinion is that of a savvy investor, not a panicky, attention-seeking Apple analyst. Who is more likely to get the headline? 😉
    watto_cobramuthuk_vanalingam
  • Reply 11 of 12
    asdasd said:
    maestro64 said:
    Those numbers do not add up. If operation costs increase that much in the last few week of Q3 just for the iPhone X to impact the bottom line by 40%, that means they were taking a loss on every iPhone x they shipped. Foxconn operating margins are low double digits to single digit. There has to more going on then the iPhone being harder to assemble. Foxconn would not just eat this they would have pass it along to Apple especially if there was yield issue on parts as rumors have been saying.
    It’s quite possibly a penalty. 


    could be but i doubt it, if it was yield issue on parts, Foxconn has no control over that. Most of what Foxconn provide to Apple is labor to assemble the phone, and they would have done a time study on assemble and test and set their cost accordingly. If it got worse than that, and it would have to be far more than 40% more labor costs to impact Foxconn total bottom line. They make a lot of product for lots of other companies. I think they took a hit elsewhere like part costs which they did not plan for since they do buy parts for other customer and if they have locked contract on pricing this could have impacted them across the board.

    The iPhone x would not be 40$ of their business, it probably less then 10% so it to impact the bottom line by 40% they where shipping $ with every phone to Apple. Did any one find $'s in their new iPhone x box.

    edited November 2017
  • Reply 12 of 12
    jbdragonjbdragon Posts: 1,903member
    spice-boy said:
    Expect more manufacturers to have set backs as companies like Apple keep pushing for more advanced components to stay on top. 
    I don’t think they expected demand for the X to be so elevated, and 8 muted.  

    The manufacturers were probably positioned to volume produce the 8, and it was expensive to switch to the X.

    This really isn’t that big a deal for Apple, besides delaying sales slightly as customers waited on the X.



    Who is they, Apple? Because anyone with half a brain when seeing the new iPhones this year, the iPhone 8 and 8+ which were basically just like the 7 and 7+ and the 6S and 6S+ and the 6 and the 6+. Or the iPhone X which is well, 10 must be better then 8, why the hell would you waste your time with a 8 or 8+? Plus being a complete redesign after all these years!!!! I'm still using my iPhone 6. I didn't feel the need to upgrade. I almost jumped on the X but with low supply, and being the first major redesign. New Apple GPU, FaceID, etc, I figured I would be better off holding out until next year iPhones and let Apple tweak any hardware issues. I also expect a big GPU improvement next year. Most app's will have been updated to the new screen. Etc.

    But for anyone buying a new phone NOW, It's dumb to get the 8 or 8"+. It just is. Spend a little more money and get a completely new and improved iPhone!!! I knew sales for the 8 and 8+ were going to be slow because everyone was going to wait for the iPhone X. Anyone thinking otherwise was just dumb.

    I still don't know why Apple has kept the numbers. It's redundant!!! Now it brings up whole new issues next year. Is the iPhone X going to be called the iPhone XI? Is there going to be a iPhone 8S and 8S+ next year or is Apple jumping to 9? If anything I think they would jump to 9, in keeping with Samesung. As in the S9 and Note 9. If Apple goes 8S and 8S+, now it looks like they're behind. That's how the general public see's things. What happens the year after that? Because Apple has already used X and XI, so would Apple jump to XIII?

    This is why Applw should just have names them, iPhone, iPhone Plus, iPhone Pro, and iPhone SE which the next one come out. You notice Apple doesn't give the iPhone SE any number!!! Why not??? It's not like Apple releases iPhone, 2 or more times per years. Zero need for numbers. They should have dropped the numbers. These are the 2017 models.

    You'll notice Apple dropped numbers on the iPads. I have a 12.9" iPad Pro, the 2017 model. THen there's the 2015 year modem. It's not a 1 or a 2. Look n Apple's site, it's a 9.7" iPad, or a 10.5 or 12.9" iPad Pro. There's NO NUMBERS!!! Why? because it's redundant. All Apple has done with the iphones now is made is confusing. Releasing 8, 8+ and a 10. What happened to 9? Why would I get a 8 or 8+, if 10 is better,newer, higher number?
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