Date
18 November 2017
Foxconn chief Terry Guo is trying to reduce his company's dependence on its supplier business with Apple. Photo: Bloomberg
Foxconn chief Terry Guo is trying to reduce his company's dependence on its supplier business with Apple. Photo: Bloomberg

iPhone duo’s diverging fortunes

If you had the vision to tell iPhone would be a game changer for Apple and bought shares in 2007 when the first-generation iPhone was introduced, you would be sitting on more than 200 percent profit.

Yet iPhone wouldn’t have enjoyed the huge success without Apple’s long-time contract manufacturing partner Foxconn Technology Group.

But if investors picked the latter as the investment target instead, the return would have been much inferior. Hon Hai Precision (2317.TT), Foxconn’s flagship unit, closed the year 2007 at about NT$102, and now it’s at NT$103.5.

Apple’s net profit surged from US$3.5 billion in 2007 to US$37 billion in 2013. Hon Hai made only about 40 percent more during the seven-year period.

It won’t be easy to find a simple explanation for the diverging performance. The widely reported labor cost surge in China could be one factor. Weaker bargaining power of OEM makers against brand owners in general could be another.

Apple made 21 cents out of every dollar of sales last year, up from 14 cents in 2007. Hon Hai’s net margin, disappointingly, halved to 3 percent over the period.

Money is not the only thing at stake. Apple gets all the praises for creating the chic phone while Foxconn gets all the negative coverage for running sweatshops and causing a chain of worker suicides.

Perhaps Hon Hai can never be as innovative as Apple, but Foxconn chief Terry Guo is definitely not happy with the status quo, and he is trying different things to reshape his empire and lessen dependence on its supplier business with Apple.

So far, Guo’s retailing venture seemed to be failing, but hopes are high regarding his ambitions in the mobile carrier business, robotics and smart car-related electronics.

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CG

Funny Money.

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