Strong December quarter results and anticipation for the next-gen iPhone 8 have propelled the Apple stock to a record high. But Apple’s success affects more than just Apple. Growing optimism about the iPhone 8 has driven shares of Hon Hai Precision Industry aka Foxconn to the highest level in almost a decade, reports Bloomberg. Foxconn is Apple’s largest manufacturing partner.
Foxconn stock rallies 29% on iPhone 8 hype
Riding on the iPhone 8 euphoria, Foxconn shares have jumped 29% in the last year despite a flat mobile market. The 10th anniversary iPhone is rumored to be unlike any smartphone Apple has launched so far. It is said to have a glass body with stainless steel frame, an edge-to-edge OLED display, wireless charging, facial recognition, and improved waterproofing capabilities.
Apple’s recent acquisition of the Israeli startup Realface has fueled speculations that the iPhone 8 could feature facial recognition technology. Realface claims that its technology provides users with the “highest level of authentication and security.” Apple is reportedly ditching the physical home button and Touch ID fingerprint sensor in favor of the facial recognition technology.
Foxconn to start assembling iPhone 8 in June quarter
Foxconn will be responsible for assembling the iPhone 8. The Taiwanese company may also have grabbed orders to assemble the iPhone 7S and 7S Plus that will be iterative upgrades over the current flagship. The iPhone 8 is set to enter mass production in June quarter. Early production would help Apple suppliers fix manufacturing issues and improve yield rates.
Citing data from Counterpoint Research, Bloomberg says Apple could sell 20-23 million iPhone units in China alone in December quarter of 2017. That’s about 20% higher than Chinese iPhone sales in the same quarter a year ago. The Cupertino company has been losing market share to local Android vendors in recent years. As the global smartphone sales growth slows, Foxconn has been investing heavily to diversify its revenue source.
Foxconn diversifying its income sources
Last year, the Taiwanese company acquired Sharp, and is transforming the ailing Japanese major into a profitable business. Foxconn has also invested in areas such as virtual reality, robotics, artificial intelligence, and the Internet of Things. Foxconn and Sharp are considering setting up a multi-billion dollar display facility in the US. They are also building a $9 billion LCD factory in China.
An average of analysts’ estimates compiled by Bloomberg indicates that Foxconn’s net income could decline in 2016 for the first time since 2008. However, its earnings could jump 12.2% this year, driven by the iPhone 8. KGI Securities analyst Ming-Chi Kuo estimates that the iPhone 8 would be priced at above $1,000. The exciting new features and sensors are going to increase the cost of production, which Apple would eventually pass on to consumers.