Foxconn has achieved stable revenue in the off-season for two consecutive years, and its physical adjustment has been successful

Just before Apple is about to release its latest iPhone product in 2019, Apple's main foundry Foxconn also announced its revenue figures, which still maintained a stable and slight growth. This is also the first time in the past two years that Foxconn has delivered stable figures in the off-season operations from March to August, indicating that Foxconn has successfully freed itself from the influence of Apple.

According to past experience, Apple accounts for about 50% of Hon Hai's annual revenue. In other words, the peak and off-peak seasons of Apple's operations will directly affect Hon Hai's performance. Take 2017 as an example. In the six months from March to August, Hon Hai's revenue was the lowest in May at NT$279.8 billion (the same unit below), and the highest was NT$341.6 billion in March. In other months, it was approximately between NT$310 billion and NT$320 billion, with a fluctuation of 22%.

However, in 2018, Hon Hai's revenue performance from March to August was the lowest in April at 343.9 billion yuan, and the highest in August at 396.7 billion yuan. The fluctuation has narrowed to 15%, and even grew month by month from April to August. This year, Hon Hai's revenue from March to August has been steadily rising, from 376.6 billion yuan to 398.8 billion yuan. Not only has the fluctuation of the high and low fluctuations been reduced to 5%, but it has also increased slowly month by month.

Revenue rises in off-season, communications and non-Apple are key

According to the rough classification of Hon Hai's product revenue, including communications, consumption and computing, Apple iPhone is mainly classified as consumer products. According to Hon Hai's internal revenue performance, from March to August this year, communications ranked first in May and August among the three major products. As for the other four months, although consumption also performed strongly, it is worth noting that during the off-season of Apple iPhone, Hon Hai's mobile phone revenue still grew steadily, proving that Hon Hai's mobile phone product portfolio has undergone a significant qualitative change.

Under the impact of the trade war, the global smartphone environment is quite chaotic this year, especially as the Sino-US trade war has yet to come to a conclusion. Huawei in particular has become a key mainland manufacturer that has been squeezed. It was originally reported that Foxconn also took the initiative to reduce Huawei's smart production capacity. Although Foxconn has not responded to the relevant Huawei news, Foxconn's revenue figures can also prove that the impact of Huawei's sales ban does not seem to be that great.

If we analyze Hon Hai's revenue mix again, consumer products even ranked first among the main products for several months during the traditional off-season. In other words, non-Apple mobile phones have become one of the mainstays of Hon Hai's revenue during the off-season when iPhone sales are low.

Another key product is 5G-related communication products. As we all know, although Huawei has been banned from selling to the United States, compared with the United States, other countries are still actively planning 5G and have not banned the use of Huawei, which also allows Foxconn, Huawei's 5G communication product OEM factory, to continue to benefit.

Foxconn acquires stake in Sharp to expand its component layout and secures a share of Apple

Compared with other major electronic foundries, Hon Hai's biggest advantage is its complete upstream and downstream integration. In addition to semiconductors, Hon Hai's assembly and related component coordination is still unmatched by other competitors. Industry insiders pointed out that the current situation is very obvious. When Hon Hai acquired a stake in Sharp in 2016, Sharp's components including panels also made up for what Hon Hai lacked, allowing Hon Hai to get rid of the seasonal fluctuations caused by Apple after two years of adjustment.

However, industry insiders also believe that Apple's iPhone's global market share is maintained at around 20%. Even if Apple raises its prices, its market share will not change much and will remain quite stable. However, while raising prices, the assembly plant's outsourcing costs will also increase, which is the key to Hon Hai's revenue growth.

Such physical adjustments have actually allowed Foxconn's management team to be smoothly replaced. The market was originally worried that there would be a period of pain after Foxconn founder Terry Gou retreated to the second line, but as of now, Terry Gou has laid the foundation for Foxconn's physical transformation, allowing subsequent succession teams to effectively shorten the running-in period and prevent the company's operations from being affected by changes in senior management.

Now that Apple is about to release a new phone, industry insiders expect that Apple will once again show explosive power. Although Apple products will be subject to additional tariffs by the United States on December 15, it is foreseeable that from September to November, with the stabilization of non-Apple products and the support of Apple's new phones, Hon Hai's monthly revenue performance will be even more impressive than the same period last year.