iPhone Maker Hon Hai Profit Beats, Easing Supply-Chain Fears

Hon Hai Precision Industry Co., the maker of most of the world’s iPhones, posted a profit that beat estimates as demand for its cloud products helped it weather supply-chain snarls and sluggish smartphone demand.

Apple Inc.’s biggest assembly partner reported net income of NT$33.3 billion ($1.1 billion) for the quarter through June, against the average projection for NT$30.8 billion. Revenue totaled NT$1.5 trillion, Hon Hai reported previously.

Hon Hai has been navigating component shortages, patches of weakness in the economy and Covid-related logistics bottlenecks in China. In response, the company, which also makes Dell desktops and Sony PlayStations, has used its scale to negotiate with customers and suppliers.

Apple logged strong quarterly results, particularly from the iPhone, despite lingering effects from the pandemic. While that reassured investors concerned about a slowdown, worrying signs remain, with Apple’s Mac, iPad and its wearables division posting sales declines from a year ago.

Given the potential for a downturn in consumer appetite for gadgets, the Taiwanese company has been expanding its revenue from corporate customers, logging solid sales in its cloud and network computing products in July.

What Bloomberg Intelligence Says:

The company’s server products may grow fast due to solid demand for migration to cloud computing. Its exposure to high-end IT products and operational resilience could expand its market share when entry-level demand wanes quickly and lockdowns in China impact supply chains.

-Steven Tseng, analyst

Hon Hai is also making a play to expand in electric vehicles. The world’s largest contract manufacturer has targeted 5% market share in EVs in 2025, helped by its acquisition of Lordstown Motors Corp.’s electric pickup trucks factory in Ohio. The two partners will announce a new vehicle project in the fourth quarter, Lordstown said last week.