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Hon Hai Precision Industry Co., Ltd. (HHPD.L)

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  • Apple Preparing 75 Million 5G iPhones Alongside New Watches and iPad
    Bloomberg

    Apple Preparing 75 Million 5G iPhones Alongside New Watches and iPad

    (Bloomberg) -- Apple Inc. has asked suppliers to build at least 75 million 5G iPhones for later this year, roughly in line with last year’s launch, in a sign that demand for the company’s most important product is holding up in the midst of the global pandemic and recession.The Cupertino, California-based technology giant anticipates shipments of these next-generation iPhones may reach as high as 80 million units in 2020, according to people familiar with the situation. Apple plans to launch four new models in October with fifth-generation wireless speeds, a different design and a wider choice of screen sizes, said the people, who asked not to be identified discussing unannounced products.Among a comprehensive product refresh in the fall, Apple is also preparing a new iPad Air with an edge-to-edge iPad Pro-like screen, two new Apple Watch versions and its first over-ear headphones outside the Beats brand. A smaller HomePod speaker is in the works, too. An Apple spokeswoman declined to comment.Suppliers to the Silicon Valley giant rose on Tuesday. Taiwan Semiconductor Manufacturing Co. and LG Display Co. closed 2% up, lens supplier Largan Precision Co. climbed 4.1% and headphones assembler Goertek Inc. gained 2.1%. Apple rose 2% at 10:07 a.m. in New York.Apple and its manufacturing partners always ramp up production ahead of the rollout of new iPhones each fall. In the summer of 2019, suppliers were preparing to make components for as many as 75 million handsets. The target in 2018 was similar, so this year’s goal of 75 million to 80 million units is a bullish sign. Key iPhone assembly partner Hon Hai Precision Industry Co., also known as Foxconn, has put up several notices on WeChat over the past month recruiting workers for its main iPhone campus in the central Chinese city of Zhengzhou.While the Covid-19 outbreak has hammered the global economy and disrupted supply chains, Apple is seeing strong demand for iPhones, iPads and Mac computers from people working and studying remotely. Revenue from iPhones crushed Wall Street expectations in the most recent quarter. The device still generates almost half of Apple’s sales, and that often tops 60% in the holiday season. Apple shares have soared 76% this year, making it the first U.S. company to surpass $2 trillion in market value.The four new phones will be split into two basic and two high-end models for the first time, and all will feature OLED displays with improved color and clarity. The two regular iPhones will come in a new 5.4-inch size and a 6.1-inch option, while the Pro devices will offer a choice of a 6.1-inch or an enlarged 6.7-inch display, which will be the largest Apple’s ever put in an iPhone.All of the new smartphones will have updated designs with squared edges similar to the iPad Pro, and the high-end phones will continue to use stainless steel edges versus aluminum sides on the cheaper variants. The company is also planning a dark blue color option on the Pro models to replace the Midnight Green of 2019’s iPhone 11 Pro line.Read more: Apple Plans iPad-Like Design for Next iPhone, Smaller HomePodAt least the larger of the Pro phones will have the same LIDAR camera as on the latest iPad Pro, which allows augmented-reality apps to have a greater understanding of their surrounding environment. Among the most significant improvements of the new handsets will be the new A14 processor, upgrading speed and power efficiency.Some Apple employees testing the new devices think that the new 6.7-inch screen is one of this year’s most notable improvements, the people familiar with the situation said. A few testers have also found that some of the current 5G networks are not improving connection speeds much, the people added.Apple plans to ship the lower-end phones sooner than the Pro devices, according to people familiar with the staggered release strategy. During a recent conference call, Apple said the new iPhones would ship a “few weeks” later than last year’s models, which started shipping Sept. 20. This year’s rollout is on course to be the latest since the release of the iPhone X in November 2017.The design of this year’s iPhones and many features were finished before Covid-19 spread, but the pandemic did create issues for final testing and delayed the start of production by several weeks. While the new iPhones won’t ship until later, Apple’s iOS 14 software will arrive in September, the people said.Read more: Apple Culture of Secrecy Tested by Employees Working RemotelyThe new Apple Watch lineup will include a successor to the Apple Watch Series 5 and a replacement for the Series 3 that will compete with lower-cost fitness devices such as those from Fitbit Inc.The smaller HomePod will help Apple renew its push into the smart home at a lower price, albeit with fewer speakers inside the device than the current $299 model. While the first HomePod was praised for its audio quality, consumers have panned its limited Siri functionality and price. Earlier this year, Apple merged some of the Apple TV and HomePod engineering teams as it looks to renew its focus on home devices.Apple has also been developing a new Apple TV box with a faster processor for improved gaming and an upgraded remote control, however that device might not ship until next year, according to people familiar with its development. The company is working on a feature for the new remote similar to Find My iPhone that would make the TV accessory easier to find. The company’s other product in development is called AirTags, designed for locating physical items, which will be equipped with a leather carrying case, Bloomberg News has reported.(Updates with Apple shares in fourth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • China’s Days as World’s Factory Are Over, IPhone Maker Says
    Bloomberg

    China’s Days as World’s Factory Are Over, IPhone Maker Says

    (Bloomberg) -- A key supplier to Apple Inc. and a dozen other tech giants plans to split its supply chain between the Chinese market and the U.S., declaring that China’s time as factory to the world is finished because of the trade war.Hon Hai Precision Industry Co. Chairman Young Liu said it’s gradually adding more capacity outside of China, the main base of production for gadgets from iPhones to Dell desktops and Nintendo Switches. The proportion outside the country is now at 30%, up from 25% last June.That ratio will rise as the company -- known also as Foxconn -- moves more manufacturing to Southeast Asia and other regions to avoid escalating tariffs on Chinese-made goods headed to U.S. markets, Liu told reporters after his company reported financial results.“No matter if it’s India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each,” Liu told investors on a conference call, adding that while China will still play a key role in Foxconn’s manufacturing empire, the country’s “days as the world’s factory are done.”Foxconn said in a statement Thursday that, contrary to “inaccurate media reports,” management’s comments during the call did not refer to any specific companies, facilities or products, and were intended to reflect macroeconomic and industry trends.Intensifying trade tensions between Washington and Beijing have pushed device manufacturers to diversify their production bases away from China, and Liu last year said that Apple’s most prized product, the iPhone, can be made outside China if needed. The two nations remain in trade talks, but Liu’s comments affirm a growing expectation that the China-centric electronics supply chain will fragment over the longer term.Read more: Trump Tumult Has Gadget Giants Splitting Along U.S.-China LinesThe Taiwanese company reported better-than-expected net income of NT$22.9 billion ($778 million) for the quarter ended in June, a period that saw increased demand for iPads and MacBooks. Revenue was NT$1.13 trillion, but Hon Hai warned it expects its third-quarter sales will be down by double digits relative to 2019. Apple is expected to delay its iPhone launch this year.Hon Hai is bouncing back from a record profit slump in the first quarter as production at its factories recovered and shelter-in-place orders spurred demand for home computing equipment. The pandemic likely boosted iPad and Mac sales, even as Apple store closures weighed on iPhone sales, Apple CEO Tim Cook said on July 31 after reporting quarterly revenue that crushed estimates. Apple accounts for half of Hon Hai’s sales.Read More: Apple Smashes Revenue, IPhone Estimates on Pandemic DemandEven as Apple outperformed, Hon Hai’s other customers have fared less well. Hong Kong-listed subsidiary FIH Mobile Ltd. said in its Aug. 7 earnings release that while Huawei Technologies Co.’s new phones have been popular in China, they missed expectations elsewhere following U.S. sanctions. Another key customer Xiaomi Corp. suffered a backlash in the Indian market amid growing tensions between China and the South Asian country. FIH lost $100 million in the first half.Foxconn has been shaking up its traditionally China-focused operations. Hon Hai is among Apple assembly partners that plan to expand operations in India, potentially helping the iPhone maker grow its presence in the country of 1.3 billion and shift some of the U.S. company’s supply chain outside of China as ties between Washington and Beijing fray.Chinese rivals are also posing a growing challenge. Local electronics titan Luxshare Precision Industry Co. is poised to become the first Chinese homegrown iPhone assembler after sealing a deal in July to buy an Apple handset production plant from Wistron Corp. While Hon Hai will keep assembly orders for premium iPhones, Luxshare will eat into the business for mid-to-entry-level Apple handsets, Fubon Securities analyst Arthur Liao wrote in a July 23 note.Foxconn will work on its component business to maintain tech leadership and it also benefits from its long-term relationship with Apple, Liu said in response to several analysts’ questions about Foxconn’s competitive strategy against the rising Chinese supplier.Orders could be further affected after President Donald Trump issued an executive order barring U.S. residents from doing business with Tencent Holdings Ltd.’s WeChat. Annual iPhone shipments could plunge 25%-30% if Apple is forced to remove the app from its app stores worldwide, TF International Securities analyst Kuo Ming-chi warned in an August 9 note.(Updates with Foxconn’s statement from the fifth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Apple’s Climate Promise Depends on Taiwan Partners Going Green
    Bloomberg

    Apple’s Climate Promise Depends on Taiwan Partners Going Green

    (Bloomberg) -- Apple Inc. has gone carbon neutral. But in order to say the same for its flagship iPhone, it’s going to need help from Taiwan.More than three-quarters of the emissions that come from making Apple’s ubiquitous products come from outside suppliers, according to the company’s Environmental Progress Report. That includes Taiwanese electronics giants like TSMC and Foxconn, which still get about 90% of their power from non-renewable sources, according to company reports.That’s changing though. The firms are installing solar panels and buying power from offshore wind farms in line with Apple’s target of having all of its products be carbon-neutral by 2030. It underscores how climate pressure is increasingly coming not only from activists, but from within company’s own supply chains.“What Apple and other companies are trying to do is contribute to meeting Paris climate targets by decarbonizing their own footprints and making it a precondition for their partners and suppliers to use renewable energy,” said Prakash Sharma, director for the energy transition practice at consultancy Wood Mackenzie Ltd. “It’s gaining momentum because more and more companies are moving in that direction.”So far 71 of Apple’s hundreds of suppliers have committed to using only renewable energy, about 8 gigawatts worth, or more than the peak power demand for the entire nation of Singapore. Once completed, these commitments will avoid over 14.3 million metric tons of greenhouse gases annually— the equivalent of taking more than 3 million cars off the road each year.Taiwanese companies make up an outsize proportion of Apple’s suppliers worldwide because of their dominance of sectors such as contract manufacturing and made-to-order semiconductors. Linchpins of Apple’s manufacturing machine include Taiwan Semiconductor Manufacturing Co., which exclusively makes cutting-edge chips for Apple’s iPhones and iPads in Taiwan, and Hon Hai Precision Industry Co., also known as Foxconn, which assembles more than 100 million iPhones annually. Both firms recently agreed to join the renewable energy drive.Wind and solar power can be as cheap as fossil fuels, but they don’t produce at all hours of the day, so it isn’t feasible for major factories to run directly on renewables alone. Improvements in battery technology might soon change that, but at the moment Apple isn’t pushing its suppliers in that direction.Instead, Apple wants them to invest in enough renewable energy in their home region to cover their power use. That way even if a factory requires coal-fired electricity in the middle of the night, it will have invested in enough wind or solar to keep an equivalent amount of coal from being burned at other times.For Foxconn, that means installing solar panels on the roofs and of its campuses in places like Henan province in China, where coal is still the dominant source for power. The company had installed 224 megawatts of clean energy by the end of 2019, up from 33 in 2017. But it still has a long way to go, as solar power and renewable energy credits amounted to only about 10% of its power use last year, the company said in its sustainability report.TSMC, which used renewable energy and credits for 6.7% of its power in 2019, has committed to producing renewable energy for its entire operations by 2050. It signed a deal last month with Orsted A/S to buy all of the power from a 920-megawatt wind farm the Danish company is developing off the coast of Taiwan, in what is the world’s largest private renewable power deal. The deal means TSMC now actually has agreements to buy more clean energy than Apple, according to BloombergNEF.The company’s efforts have been aided by a massive Taiwanese government plan to transform the country’s energy mix away from coal and nuclear and toward renewables and natural gas. The Orsted deal, for example, came after the wind-maker had established a major presence in the company thanks to several government-backed deals for offshore wind farms.“Growing sustainability initiatives by major companies are definitely making a dent in their supply chains,” said Jonathan Luan, a Beijing-based analyst with BloombergNEF. “Some companies have been able to change market rules to achieve their goals, like in Taiwan.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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