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Hon Hai Precision Industry Co., Ltd. (HHPD.L)
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- Bloomberg
Hon Hai Revenue Jumps 44% on Stay-at-Home Demand for Gadgets
(Bloomberg) -- IPhone assembler Hon Hai Precision Industry Co.’s first-quarter revenue jumped 44% on robust demand for Apple Inc.’s new 5G devices and other gadgets that help consumers stay connected at home during the pandemic.Revenue in the three months through March rose to NT$1.34 trillion ($47 billion), the Taiwanese manufacturer reported Tuesday, in line with the average analyst estimate. Sales in March climbed to NT$441.2 billion. The stock jumped as much as 1.6% in Taipei on Wednesday.The strong showing from the world’s largest contract electronics maker suggests demand for iPhones, gaming consoles and servers remains robust as consumers snatch up devices for remote work, home-schooling and entertainment needs. Companies are also spending on technology, expanding data-center infrastructure to better serve customers’ online activities.However, Hon Hai warned in late March that component shortages could persist until 2022 and affect under a tenth of its shipments, amplifying concerns that a global chip crunch could extend well beyond this year.Shares of Hon Hai gained 60% over the past six months as the company announced its ambitions to venture into the electric-vehicle business, inking manufacturing deals with partners such as Byton Ltd. and Fisker Inc.Annual shipments of Hon Hai’s EVs may reach 1.1 million units, or around 10% of global share, by 2025, Morgan Stanley estimated in March. Its auto businesses could generate $35 billion in revenue by that year, according to analysts including Sharon Shih.(Adds shares in second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
- Bloomberg
Foxconn’s Profit Misses Estimates as Pivot to Cars Accelerates
(Bloomberg) -- Hon Hai Precision Industry Co. warned that component shortages could persist till 2022 and affect under a tenth of its shipments, amplifying concerns that a global chip crunch could extend well beyond this year.The assembler of most of the world’s iPhones follows fellow electronics giants that have in recent months suggested a global shortage of semiconductors could be more severe than anticipated, disrupting production of everything from cars to phones. Hon Hai made its projection, which didn’t specify the extent of the hit to its revenue, after reporting quarterly profit that disappointed investors. Its shares slid as much as 3.9% Wednesday.Samsung this month became the largest technology giant to voice concerns about chip shortages spreading beyond the automaking industry, the first to get hit because car companies underestimated a post-Covid surge in global orders. Continental AG, Renesas Electronics Corp. and Innolux Corp. have in recent weeks warned of longer-than-expected deficits thanks to unprecedented Covid-era demand for everything from vehicles to game consoles and mobile devices.Chairman Young Liu said that shortages appear to be growing worse and could last into next year. While Hon Hai is Apple Inc.’s most important production partner, he didn’t specify how or whether the iPhone maker would be affected. But he said that, based on what he’d read, the deficit may extend into 2022.“The impact of shortages in the first two months of the quarter have not been too obvious, because our customers are major companies,” Liu said on a conference call. “Still we are seeing some gradual changes and are monitoring the situation cautiously. Our expectations are that there won’t be a big impact, under 10%.”See How a Chip Shortage Snarled Everything From Phones to CarsHon Hai, known as Foxconn Technology Group, said net income for the quarter ended December declined 3.7% to NT$46 billion ($1.6 billion), slightly below the NT$50.2 billion average of analyst estimates.Earnings in the previous three months had been driven mainly by new smartphones from Apple, and as demand for home computing equipment remained elevated. But the Taiwanese assembler is casting around for new growth drivers a year into the pandemic and it’s identified electric vehicles as a key emerging industry, joining a rush of technology firms seeking a foothold in auto manufacturing ahead of Apple’s own smart vehicle efforts.Revenue in the three months ended December rose 15% to NT$2 trillion, reflecting contributions from the iPhone 12 series, whose launch last year had been delayed due to Covid-19, previously disclosed figures showed. Sales of all business lines likely grew in the first quarter, the company said in a presentation earlier this month, when it revealed record monthly sales for February.Read more: Samsung Warns of Severe Chip Crunch While Delaying Key PhoneWhat Bloomberg Intelligence SaysHon Hai’s sales growth in 2021 may still accelerate to about 7% from 0.3% in 2020, in our opinion, despite its shipments still being delayed by component shortages for the next six months. The sales increase will be driven by strong iPhone and Macbook demand and continuing work-from-home and remote-learning trends.-- Charles Shum and Simon Chan, analystsClick here for the researchIn recent months, Foxconn has entered into partnerships with an array of carmakers including Zhejiang Geely Holding Group Co., Byton Ltd. and Fisker Inc. to boost its automotive capabilities. Two light vehicles based on the Foxconn platform will be unveiled in the fourth quarter, while an electric bus may be launched around the same time, Liu said in February.Its MIH Alliance for vehicles counted more than 1,300 partners as of March 29, the company said Tuesday. Over the next two months, it may announce new tie-ups for batteries, while seeking new partners for areas like electronic controls and integrated circuits, Liu said.Read more: IPhone Maker Foxconn to Help Launch Electric Cars This YearAnnual shipments of Hon Hai’s EVs may reach 1.1 million units, or around 10% of global share, by 2025, Morgan Stanley estimated this month. Its auto businesses could generate $35 billion in revenue by that year, according to analysts including Sharon Shih, who lifted their price target for the stock by 29% to NT$168. Shares of Hon Hai have gained more than 80% in the past year, reaching a 40-month high last week.(Updates with share slide in the second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
- Bloomberg
Samsung Warns of Severe Chip Crunch While Delaying Key Phone
(Bloomberg) -- Samsung Electronics Co. warned it’s grappling with the fallout from a “serious imbalance” in semiconductors globally, becoming the largest tech giant to voice concerns about chip shortages spreading beyond the automaking industry.Samsung, one of the world’s largest makers of chips and consumer electronics, expects the crunch to pose a problem to its business next quarter, co-Chief Executive Officer Koh Dong-jin said during an annual shareholders meeting in Seoul. The company is also considering skipping the introduction of a new Galaxy Note -- one of its best-selling models -- this year, though Koh said that was geared toward streamlining its lineup.Industry giants from Continental AG to Renesas Electronics Corp. and Innolux Corp. have in recent weeks warned of longer-than-anticipated deficits thanks to unprecedented Covid-era demand for everything from cars to game consoles and mobile devices. Volkswagen AG said this week it’s lost production of about 100,000 cars worldwide. In North America, the silicon shortage and extreme weather have combined to snarl more production at Toyota Motor Corp. and Honda Motor Co. The fear is the crunch, which first hit automakers hard, may now disrupt the much larger electronics industry.“There’s a serious imbalance in supply and demand of chips in the IT sector globally,” said Koh, who oversees the company’s IT and mobile divisions. “Despite the difficult environment, our business leaders are meeting partners overseas to solve these problems. It’s hard to say the shortage issue has been solved 100%.”Read more: Chip Shortage Spirals Beyond Cars to Phones and ConsolesSamsung, the world’s largest smartphone maker, is working with overseas partners to resolve the imbalance and avert potential setbacks to its business, its co-CEO said. Its shares slid 0.6% in Seoul on Wednesday, while suppliers and Asian chipmakers including Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. also fell.Chipmakers like Samsung and TSMC are at the forefront of a global effort to plug a shortfall in supply of semiconductors, the building blocks of a plethora of consumer gadgets. The deficit has closed auto plants around the world and now threatens supply of other products. While the Korean company is the leading maker of made-to-order silicon after TSMC, it relies on external suppliers and manufacturers for certain parts like power management and radio chips.Larger-than-anticipated Covid-era demand for smartphones has also stretched stores of Qualcomm Inc.’s Snapdragon chips, the go-to processors for mobile devices. Qualcomm designs the chips, known as app processors, but relies on Samsung and TSMC to produce them and the Taiwanese chipmaker’s capacity has been strained.“The tightened supply of Qualcomm AP chips produced by TSMC is affecting everybody except Apple,” said MS Hwang, analyst at Samsung Securities. “PCs will soon be hit due to the short supply of display driver ICs, and the profitability of TV will be affected by soaring LCD panel prices.”The World Is Short of Computer Chips. Here’s Why: QuickTakeCompounding matters, Samsung’s own production got sideswiped last month. Its fab in Austin, Texas -- which makes chips both for internal and external consumption -- was sidelined in February by statewide power outages and hasn’t resumed full production. The resulting shortfall in production of Qualcomm 5G radio frequency chips could reduce global smartphone output by 5% in the second quarter, research firm Trendforce estimates. But the outage there is likely to affect Samsung’s mid-tier phones and laptops more than its top-of-the-range models or server chips, said Greg Roh, a senior vice president at HMC Securities.“If Samsung is publicly talking about future products, you know that the silicon crunch is serious,” said Avi Greengart, analyst and founder of consultancy Techsponential.Carmakers got hit first by the chip crunch in part because of poor inventory planning and are expected to miss out on $61 billion of sales this year alone. Honda Motor Co. on Wednesday said it will temporarily suspend some production next week at a majority of U.S. and Canada plants, underscoring the deepening crisis.Some analysts say shortages could get mostly ironed out in coming months. But the concern is that tight supply in certain segments -- such as in more mature semiconductors where it takes time to build capacity -- could eventually throttle the broader consumer electronics industry and jack up prices if it persists. Semiconductors are now near the top of official agendas from Washington to Brussels.At the same time, China’s insatiable appetite for chips -- fueled in part by its rapid recovery from the pandemic -- and inventory stockpiling by local companies is fueling demand. Sales for the country’s chip industry climbed 18% to 891.1 billion yuan ($137 billion) in 2020, China Semiconductor Industry Association Chairman Zhou Zixue told a conference in Shanghai Wednesday.“The IC shortage will be a problem to frustrate the supply chain in next six months,” said Charles Shum, an analyst with Bloomberg Intelligence.See, Carmakers, the Chip Shortage Isn’t Personal: Tim CulpanOn Tuesday, Hon Hai Precision Industry Co. -- the assembler of most of the world’s iPhones -- joined a chorus of industry executives stressing it’ll take time to resolve imbalances in demand and supply.“We see a shortage, we feel it. But the impact for most of our customers is not that big,” Hon Hai Chairman Young Liu told reporters in Taipei. “For certain customers that have better than expected orders, then there’s some impact. For major customers that plan well, where there’s no big surge on orders, those customers are doing fine.”Koh said Samsung may decide not to introduce its Galaxy Note during 2021’s second half, breaking a years-long streak of annual launches for the marquee line. The Note series contributed roughly 5% of Samsung’s smartphone shipments over the past two years, IDC estimates, but accounts for a more significant chunk of revenue because it’s one of the priciest in the lineup.“Note series is positioned as a high-end model in our business portfolio,” he said. “It could be a burden to unveil two flagship models in a year so it might be difficult to release Note model in 2H. The timing of Note model launch can be changed but we seek to release a Note model next year.”(Updates with analysts’ comments and details on cutbacks from the third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
