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The slowdown in smartphone sales is hurting Foxconn far more than its biggest customer.
The news: Profit at the Taiwanese company — which is the world’s largest contract electronics manufacturer, making iPhones for Apple as well as devices for companies like Amazon — has fallen for two straight quarters. Foxconn reported a net profit of 17.49 billion Taiwanese dollars (about $567 million) for the quarter that ended June 2018. That is less than the 17.9 billion Taiwanese dollars it made during the same quarter a year earlier, and far below the 20.2 billion expected by analysts, according to S&P Global Market Intelligence.
Back story: Sales of smartphones have begun to plateau in recent years. The number of first-time purchasers of smartphones has tailed off and feature improvements have become more modest, meaning that consumers no longer feel the need to upgrade their devices as often. Other companies are also feeling the effects. Samsung, for instance, recently reported falling revenue and operating profits, blaming it partly on a decline in smartphone shipments and revenue.
But: One company succeeding in the face of the changing market is Apple. It sold only 1 percent more iPhones in the quarter that ended June compared with a year earlier. But revenue from iPhones surged 20 percent over the same period because their average selling price rose 20 percent. The secret: Apple has succeeded in convincing many people to spend as much as $1,000 on an iPhone.
Apple is Foxconn’s largest customer and accounts for a large portion of its revenue. Apple has been able to maintain its revenue growth by raising prices, but Foxconn’s sales have not mirrored those gains — which suggests that little of the iPhone price increase is making its way to Taiwan.