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Foxconn's Hon Hai earns record annual profit

Foxconn's Hon Hai Precision Industry posted record annual profits last year, a sign that production of Apple products remains strong despite heightened competition from rival electronics vendors.

Hon Hai Precision, the central manufacturing company within Foxconn Technology Group, said on Monday its net income for 2012 reached $3.2 billion, a 16 percent increase from the year before.

Net sales for the year reached $128.2 billion, a year-over-year jump of more than 13 percent.

In last year's fourth quarter, sales were up 5.9 percent year-over-year, reaching $37.49 billion. Net income in the quarter also rose by 5.6 percent from the same period last year to $1.21 billion.

The Taiwan-based company is known as the world's largest electronics supplier, and also counts HP, Microsoft, Sony, and other major tech vendors as its clients. Apple, however, makes up 40 to 50 percent of the company's revenues, according to analysts. Hon Hai helps build Apple's iPhone, iPad, iPod and Mac devices.

Hon Hai reported the strong earnings after Apple had said it sold 47.8 million iPhones during its first fiscal quarter ending on Dec. 29, a 29 percent year-over-year increase from 37 million units.

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Earlier this year, however, reports emerged that Foxconn had halted new hiring at its factories in China. One worker based at the company's facility in Zhengzhou, China, said in an interview last month this was because iPhone 5 sales had not reached the level of Apple's iPhone 4.

Foxconn, however, said the hiring freeze was the result of more workers returning to the company following the Chinese New Year holiday.

But despite the initial hiring freeze in China, Foxconn continues to expand in other areas. Earlier this month, the company said it wanted to hire 5,000 employees from Taiwan to develop new automation and robotics for assembly manufacturing. Foxconn is also building new factories in China's Guangxi region for television and solar power manufacturing, according to Guangxi's local government. It currently employs more than 1.2 million workers in China.

Sharp deal falls apart

In other Foxconn news, a deal that would have made Foxconn a major shareholder in Japan display maker Sharp has fallen apart, though the companies remain close partners in the complex global electronics supply chain.

Foxconn's Hon Hai Precision Industry announced in March 2012 it would invest about $806 million in Sharp for newly issued shares. But negotiations dragged on as Sharp's stock price plunged in the following months, and the two failed to come to an agreement on the investment by their agreed to deadline of Tuesday.

As Sharp had not received payment from Foxconn by the deadline, the new share allotment will not be issued, Sharp said in a news release Tuesday.

However, "the two companies are still discussing about details" of other possible deals, said Sharp spokeswoman Miyuki Nakayama. She said Sharp is also looking at other means of obtaining investment, which includes the possibly of finding other investors.

Good for both sides

The deal was seen as beneficial for both companies, with Foxconn gaining greater access to Sharp's LCD manufacturing capacity and advanced technologies, while Sharp received a much-needed cash infusion to boost its sagging finances. Both count Apple among their major clients and reports have said they are involved in the U.S. firm's long-rumored "iTV" product.

Sharp

A Foxconn investment firm completed a separate investment last year of roughly $700 million to take half control of one of Sharp's major factories that produces LCD displays for large screen TVs.

The two companies are now in vastly different circumstances. Earlier Tuesday, Foxconn posted a record annual profit, while Sharp is going through a major restructuring as it limps to the end of its fiscal year, for which it forecasts a deep loss.

LCD screen manufacturing still Sharp's advantage

Still, Sharp remains one of the world's largest manufactures of LCD screens, with advanced technologies that appeal to other firms. Its also remains a major seller of TVs under its own brand.

"Sharp's TV business, though on the decline, still commands significant volumes, which are mostly built by Sharp in-house," said Jeffrey Wu, an analyst with research firm IHS iSuppli.

Earlier this month, Sharp postponed a $60 investment from Qualcomm as the two firms were unable to make sufficient progress on joint display research. An earlier $60 million investment from Qualcomm was completed in December.

Sharp also secured a $100 million investment from Samsung, agreeing to become a major supplier of screens for the South Korean's company.

Jay Alabaster of IDG News Service contributed to this story.

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