Bloomberg reports that key iPhone manufacture, Hon Hai Precision Industry Co., shared that quarterly profits took a 24% dip before the outbreak of COVID-19 pandemic. The drop is attributed to the increasing tension between the United States and China trade ties, and a slight decrease in smartphone demand.
As majority of Hon Hai’s revenue is generated from manufacturing iPhone and other Apple devices in China, the company’s profits took a hit when the US increased tariffs on Chinese products. According to Bloomberg News’ calculations, Apple’s manufacturing partner’s reported net income dropped down to NT$47.8 billion in October-December period, from NT$62.2 billion in 2018 for same quarter.
In its recovery phase after the coronavirus epidemic in China, Hon Hai claims that its labour shortage issue has been resolved and its facilities are open for production with usual seasonal capacity. Therefore, coronavirus pandemic alone is ruled out as variable for the company’s profits dip. Having said that, it is important to mention that Hon Hai had to push the reopening of its iPhone city mega complex due to imposition of strict precautionary measures like social distancing and isolation. And it was successful in calling labour back to the assembly lines by giving out handsome bonuses.
Although Hon Hai (also known as Foxconn) is ready to manufacture, the rest of the world is still crippled by the COVID-19 pandemic with many countries on lockdown in Europe, North America, and Asia, to stop the spread of the virus and save lives. This health crisis has the world in overdrive mode, only focusing on the containment of spread at the expense of economic well being. And its impact has started to manifest; when Apple retracted its sales forecast in February for the quarter ending in March, Hon Hai also cut its 2020 revenue projections. Recently, Foxconn’s production units in India shut down due to 21 days lock down in the country. It is also reported by many analysts that Apple is facing supply chain, production, shipment and consumer demand challenges due to COVID-19 related lockdowns and travel restrictions, which might also result in delayed launch and release date of its latest flagship, iPhone 12.
Hon Hai is a China’s biggest private employer and an important partner of the world’s leading consumer brand. Therefore, if the company takes a hit due to any reason, whether is is because of raised USA tariffs, or coronavirus pandemic, it would result in a major disruption of made-in-China electronic products.