Core Apple manufacturer Foxconn sees December revenues down 20 percent

AppleInsider · January 8, 2016 3:05PM

Apple's primary assembly partner, Hon Hai -- better known as Foxconn -- saw its revenues drop approximately 20 percent in December, on top of missing full-year sales predictions from analysts.

The company reported December revenue of $12.3 billion, coincidentally about a 20 percent drop both month-to-month and year-over-year, according to Reuters. Annual revenues were up 6.42 percent, but that figure was below an averaged analyst consensus calling for 7 percent.

December numbers were as expected, Hon Hai said in an official statement.

A variety of Apple suppliers, such as Catcher and TPK, have either seen lower-than-expected December figures or had to adjust their 2016 spending. Along with Foxconn's data, trends appear to back a Nikkei claim that Apple is cutting its iPhone 6s/6s Plus production by about 30 percent.

The slower production has been attributed to an "inventory adjustment" rather than weak demand, giving vendors a chance to clear out stockpiled units. Demand for iPhones also typically tapers off after the Christmas season, remaining reasonably healthy until just a month or two before new models are announced -- at which point some buyers may decide to wait.

SpamSandwich · January 8, 2016 3:08PM

That should be good for another 2-4% drop of AAPL today. /s

johnjohnstone · January 8, 2016 3:09PM

And the hits keep coming.

Get your pocketbooks ready to buy Apple shares at $80 in a few weeks.

gatorguy · January 8, 2016 3:16PM

I've no doubt the numbers we'll see in the next Apple quarterly will be great as usual. Retail sales were almost certainly impressive. If there's any softness expected in the following one, and perhaps there might be based on a bunch of recent bit and pieces, Tim Cook will surely mention it in their forward projections. Also pay attention to channel inventory numbers they'll offer after the quarterly. For the moment this is a non-story. Wait for Apple to comment after the next report.

rogifan_old · January 8, 2016 3:18PM

Of course we don't know what any of this means because we don't know Apple's production cycles, channel inventory etc. The question I have is if the March quarter is going to be brutal would Apple have to pre-warn about that? Or would they only have to warn if they were going to significantly miss December estimates?

latifbp · January 8, 2016 3:22PM

rogifan_old said:

Of course we don't know what any of this means because we don't know Apple's production cycles, channel inventory etc. The question I have is if the March quarter is going to be brutal would Apple have to pre-warn about that? Or would they only have to warn if they were going to significantly miss December estimates?

Apple will provide guidance for the March quarter on the Q1 conference call this month- they only do so one quarter ahead. Their guidance has always been conservative and pretty accurate. I read some other story that analysts believe Apple is ntentionally pumping their guidance, but that's ridiculous! Apple tries to downplay unreasonable expectations always

foggyhill · January 8, 2016 3:23PM

Last year, Apple asked for less phones initially and then had to pump up the machine, this year they were asked to produce more in advance : result=less work in december.

20% less is exactly the level that Q2 was last year (-22% from Q1) (a record year).

Also, doesn't Foxconn have OTHER CLIENTS than Apple. Yes they do.

johnjohnstone · January 8, 2016 3:23PM

benjamin frost said:

No smoke without fire.

We've had had so many reports of lower orders from critical suppliers, that it is impossible to come to any conclusion other than one of substantially lower iPhone sales than Apple had hoped for.

Let us hope that Apple lowers prices to try and spur on sales.

Another possibility is Apple made oversized orders in August/Sept/Oct/Nov to make sure there would be no shortages of 6s/6s+
Unlike last year when the 6+ was supply constraint, there was no shortage of 6s+ at launch.
Now orders are cut after achieving supply/demand balance. And of course orders will be cut also because of the normal decline in sales after the holiday period.

If iPhones sales were truly weak we would have seen these supply chain stories in Oct and Nov.

IMO, it could have just been a different strategy for Apple this year. In previous years they would not stuff the supply chain, thus we would always have shortages of iPhones at launch and a month after. But this year looks like Apple 'over ordered' in Aug-Nov to make sure their were plenty phones in the channel. Now the channel is full they cut orders.

rogifan_old · January 8, 2016 3:25PM

Pacific Crest just put out a research note essentially accusing Tim Cook of lying:

Management’s confidence now looks highly likely to be misplaced, which suggests that it was either ignorant of the challenges it faced or deliberately overstating underlying trends. The former seems unlikely, which suggests that management has taken a much more aggressive tone as growth in the high-end smartphone market has slowed. This reduces our confidence in Apple’s commentary going forward.

josu · January 8, 2016 3:27PM

foggyhill said:

Last year, Apple asked for less phones initially and then had to pump up the machine, this year they were asked to produce more in advance : result=less work in december.

20% less is exactly the level that Q2 was last year (-22% from Q1) (a record year).

Also, doesn't Foxconn have OTHER CLIENTS than Apple. Yes they do.

Your statement backed by the Reuters report in which the article is based

"Analysts said Hon Hai's results could be an indicator of demand for Apple's products in the first quarter of this year, but added that period was not normally a peak selling season and past iPhone cycles had followed a similar pattern, where an interim update on a model edition tends to see slower sales."

maestro64 · January 8, 2016 3:28PM

Not saying Apple is not forecasting lower, most likely they are, the market is slowing across the world for Cell phone. But keeping mind Foxconn manufacturers for lots of companies not just apple, and they do not break down revenue by customer or factory, their 20% down is for all their customer which PC companies are in that list, and those numbers are down, along with consumer electronic products.

josu · January 8, 2016 3:32PM

larryjw said:

"Inventory adjustment" is different from "weak demand"? Americans are getting measurably dumber by the second.

But being an inventory adjustment 1Q sales must be weaker than forecasted, but no profit warning.

I don't say that Apple is not falling, is that is too difficult to understand that if the problem is excess inventory in the channel sales must be slower than expected, but no clue of discounts by retailers, or any profit warning for the unsold iPhones in the warehouses of their own retail chain.

johnjohnstone · January 8, 2016 3:33PM

maestro64 said:

Not saying Apple is not forecasting lower, most likely they are, the market is slowing across the world for Cell phone.

Wrong. Samsung sold more smartphones in Q4 then last year.

There are still 2 billion people who use feature phones that will switch to smartphones in the next 5 years. Stop relying on stupid ass reports from research companies.

jeffdm · January 8, 2016 3:37PM

Itrash said:

Greedy evil company is Apple
Foxconn is its supplier, and they treat it's chooses employees like crab.

No. Crab is delicious, unlike workers. Or Apple-hating trolls.

johnjohnstone · January 8, 2016 3:40PM

One possibility that no one on Wall Street in mentioning:

APPLE COULD HAVE STUFFED THE CHANNEL EARLY THIS YEAR COMPARED TO PREVIOUS YEARS.

It looks like Apple could have placed 'oversized' orders in Aug/Sept to make sure there were no shortages in the first few months of release. Remember when the 6+ there was massive shortages for over a month after launch. With the 6s+ there was no shortages. So because Apple stuffed the channel in Aug-Nov then of course orders for December will fall because of inventory. This is NOT a bad thing. It simply is a different strategy to make sure there is always supply on hand.

Lets just look at two suppliers that Wall Street points to as sure signs iPhone sales are sluggish. Cirrus Logic and Qorvo. Both had to warn for weaker December revenue than predicted. Notice this warning was made this month, not in November. That suggest that units were strong until December. Do their financials point to Apple stuffing the channel early this year?

Cirrus Logic
Revenue Sept2014 quarter - $210 million
Revenue Sept2015 quarter - $307 million
YoY revenue growth - 45%

Qorvo
Revenue Sept2014 quarter - $362 million
Revenue Sept2015 quarter - $708 million
YoY revenue growth - 95%

It seems obvious to me looking at those massive revenue increases in the Jul-Sept quarter that Apple placed massive orders in those months to build up the channel inventory.

josu · January 8, 2016 3:40PM

johnjohnstone said:

benjamin frost said:

No smoke without fire.

We've had had so many reports of lower orders from critical suppliers, that it is impossible to come to any conclusion other than one of substantially lower iPhone sales than Apple had hoped for.

Let us hope that Apple lowers prices to try and spur on sales.

Another possibility is Apple made oversized orders in August/Sept/Oct/Nov to make sure there would be no shortages of 6s/6s+
Unlike last year when the 6+ was supply constraint, there was no shortage of 6s+ at launch.
Now orders are cut after achieving supply/demand balance. And of course orders will be cut also because of the normal decline in sales after the holiday period.

If iPhones sales were truly weak we would have seen these supply chain stories in Oct and Nov.

IMO, it could have just been a different strategy for Apple this year. In previous years they would not stuff the supply chain, thus we would always have shortages of iPhones at launch and a month after. But this year looks like Apple 'over ordered' in Aug-Nov to make sure their were plenty phones in the channel. Now the channel is full they cut orders.

And this change in mood by you? I misunderstand you yesterday when you predicted a weaker than expected Q2 guidance? Because yesterday I totally disagree with you, sorry if my post sounded rude, sometimes I get lost in translation, but today I backed totally your words in this post.

brucemc · January 8, 2016 3:46PM

josu said:

johnjohnstone said:

And this change in mood by you? I misunderstand you yesterday when you predicted a weaker than expected Q2 guidance? Because yesterday I totally disagree with you, sorry if my post sounded rude, sometimes I get lost in translation, but today I backed totally your words in this post.

Clearly Sog took some meds to calm down a bit. Still the same old though...

johnjohnstone · January 8, 2016 3:48PM

josu said:

And this change in mood by you? I misunderstand you yesterday when you predicted a weaker than expected Q2 guidance? Because yesterday I totally disagree with you, sorry if my post sounded rude, sometimes I get lost in translation, but today I backed totally your words in this post.

Yes I changed my tune from yesterday. Only today did I think of the possibility that Apple could have stuffed the channel early this year in Aug-Oct.

I then researched the earnings for 2 key Apple suppliers - Cirrus Logic and Qorvo. And what do you know? They are showing revenue gains of 45% and 95% for the Sept quarter. So why would Cirrus Logic and Qorvo show massive revenue gains during the 6s vs the 6 cycle in Sept? Could it be that Apple order early this year and stuffed the channel so supply would not be an issue like the 6+?

This is becoming a more real possibility. If Apple did indeed stuff the channel then its possible that Apple will show strong growth in iPhone units in Dec quarter and strong guidance for March quarter.

jonl · January 8, 2016 3:56PM

johnjohnstone said:

One possibility that no one on Wall Street in mentioning:

APPLE COULD HAVE STUFFED THE CHANNEL EARLY THIS YEAR COMPARED TO PREVIOUS YEARS.

It looks like Apple could have placed 'oversized' orders in Aug/Sept to make sure there were no shortages in the first few months of release. Remember when the 6+ there was massive shortages for over a month after launch. With the 6s+ there was no shortages. So because Apple stuffed the channel in Aug-Nov then of course orders for December will fall because of inventory. This is NOT a bad thing. It simply is a different strategy to make sure there is always supply on hand.

Lets just look at two suppliers that Wall Street points to as sure signs iPhone sales are sluggish. Cirrus Logic and Qorvo. Both had to warn for weaker December revenue than predicted. Notice this warning was made this month, not in November. That suggest that units were strong until December. Do their financials point to Apple stuffing the channel early this year?

Cirrus Logic
Revenue Sept2014 quarter - $210 million
Revenue Sept2015 quarter - $307 million
YoY revenue growth - 45%

Qorvo
Revenue Sept2014 quarter - $362 million
Revenue Sept2015 quarter - $708 million
YoY revenue growth - 95%

It seems obvious to me looking at those massive revenue increases in the Jul-Sept quarter that Apple placed massive orders in those months to build up the channel inventory.

Now wait. I can't speak for the TQNT/RFMD merger AKA Qorvo, but the Cirrus results include their Wolfson acquisition and the unexpected benefit of Samsung going all-Exynos and thus all-Wolfson codec for the Galaxy S6.

bsimpsen · January 8, 2016 3:58PM

If I recall correctly, China was not in the opening salvo of the iPhone 6 cycle, but was this time around. Moving the China release forward to September could reshape the demand curve for the 6s cycle, causing higher initial build and a steeper decline after the first quarter of availability.

johnjohnstone · January 8, 2016 3:59PM

Its a very real possibility that Apple stuffed the supply channel early last year for the 6s launch to avoid supply constraints. Remember last year the 6+ had a shortage for 30+ days after launch. No such shortages this year for the 6s+.

I'm thinking Apple asked for oversized orders in Aug-Sept to make sure there were no shortages. Below are 4 iPhone suppliers and their revenue YoY increases for the Sept quarter:

Cirrus Logic - up 45%
Qorvo - up 95%
Skyworks - up 45%
Invesense - up 25%

Those are massive revenue increases. Also remember there were reports that Apple ordered 100 million iPhone 6s for the holiday quarter. So Apple could have easily over ordered in Aug-Nov to stuff the channel to make sure everyone who wants to buy a 6s can. They did not want to be supply constraint. Now that they have reached supply/demand balance they cut orders in December.

Not saying this is true but just another possibility. A possibility that Wall Street ignores to bring up.

Core Apple manufacturer Foxconn sees December revenues down 20 percent

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