From Breakingviews - Taiwan's Foxconn slowly checks into iPhone detox
This is bad news for Foxconn, which is expected to generate more than half of revenue this year from Apple, per JP Morgan analysts. The bank also forecasts that Foxconn's manufacturing share of iPhones will decline to 57% by 2025, while Shenzhen-listed Luxshare's will more than triple to 24%. Foxconn’s shares have vastly underperformed both Apple and Luxshare over the past five years.
Foxconn chief Liu Young-way might not mind a bit of distance, however. Rising labour costs and brutal price wars with Luxshare have hurt. Apple's strict procurement rules prevent Foxconn from sourcing or manufacturing many components on its own, making it hard to cut costs through vertical integration, according to Morningstar analysts. Gross margins have fallen to roughly 6% in 2021 from 8% a decade ago.
Liu hopes ventures into electric cars, batteries and more can lift that number to 10% by 2025. If they do, he might find iPhone withdrawal more tolerable.Taiwan's Hon Hai Precision, popularly known as Foxconn, could see more than 30% of iPhone production at its major Zhengzhou factory affected after violent protests erupted over Covid-19 restrictions and confusion over hiring bonuses, Reuters reported on Nov. 25, citing a source. More than 20,000 workers have left the plant.
The factory is the only one that makes premium models, including the iPhone 14 Pro. Overall, Foxconn manufactures 70% of iPhones globally, according to Fubon Research. In late October, videos of fleeing workers went viral. At the time, Foxconn said it was bringing the situation under control and was coordinating with other plants to increase production.
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