Optimism on Apple’s next iPhone is running high, pushing the company’s stock to new heights. The same optimism is helping Hon Hai Precision Industry Co (Foxconn), which is Apple’s main assembler for the iPhone. The Taiwanese company’s stock has gained 29% in the past year, with shares touching a decade-high on optimism about Apple’s tenth anniversary iPhone.
Foxconn to become a “multifaceted conglomerate”
Foxconn may want to move away from being an assembly business that is highly reliant on cost efficiency, but it does not want to encroach on its best client’s turf. Its billionaire founder Terry Gou is re-tooling it for the future. Gou has installed robots to shore up the company’s manufacturing prowess. He is also making investments in emergent fields like virtual reality and artificial intelligence.
Gou played a pivotal role in the acquisition of Sharp. After the acquisition, the ailing Japanese giant saw its value triple, and it is now making joint investments worth billions, notes Bloomberg. Sharp raised its annual operating profit forecast by 27% on Friday. The Japanese brand is barely relevant in smartphones, but it does boast a valuable display technology that Apple uses. However, it is a recognizable name in consumer electronics, and this may propel Gou’s ambitions of moving up the value chain, notes Bloomberg.
Taipei-based IDC analyst Annabelle Hsu said, “In the long run, Hon Hai will become a multifaceted conglomerate as the company’s obviously making bets in emerging sectors like robotics and Internet of Things. The main areas where Hon Hai is cooperating with Apple are seeing slower growth — think smartphones and tablets. Hon Hai has to find emerging sectors where growth rate is high. They are good at this.”
How Apple and the iPhone are important to Foxconn
Counterpoint Research expects Apple to sell 20 million to 23 million iPhones in China in the December 2017 quarter, according to Bloomberg. The iPhone doesn’t see the same kind of growth it used to enjoy, but despite that, the iPhone 7 delivered better-than-expected results. The more iPhone units that are sold, the better it will be for Foxconn, which gets nearly half of its revenue from Apple, notes Bloomberg.
The Chinese firm can use the iPhone money to drive innovation in various other tech fields that it plans to foray into. The iPhone 8 is already expected to drive Apple’s next super cycle, and hence, it will be partly responsible for whatever comes out of Foxconn in the following years, notes BGR.
