Hon Hai April Sales Up 19% to $15.8B, Boosted by iPhone, AI

Key Takeaway

• Hon Hai (Foxconn) reports a 19% increase in April sales to $15.8 billion, signaling strong iPhone sales and successful diversification into AI.
• The company's performance hints at positive iPhone sales trends, despite a near-10% drop in Q1 revenue and challenges ahead.
• Despite potential risks from market uncertainties and production shifts to India, Apple forecasts growth in iPad and services.

April Sales Surge

Hon Hai Precision Industry Co., also known as Foxconn, reported a significant 19% increase in its April sales, reaching a record NT$510.9 billion ($15.8 billion). This growth comes in the wake of the company's efforts to diversify its product lineup beyond the assembly of Apple Inc.’s iPhones, focusing more on the burgeoning field of artificial intelligence (AI) by building datacenter server racks and other equipment for AI clusters. Despite this diversification, Apple's business remains a critical component of Hon Hai's revenue, contributing to more than half of its earnings.

iPhone Sales Outlook

The performance of Hon Hai is closely monitored by investors as an indicator of iPhone sales trends. The company's recent sales report could potentially raise expectations for iPhone sales, especially after Apple's surprising beat on quarterly revenue from China. This development is particularly noteworthy given the near-10% drop in Hon Hai's first-quarter revenue, attributed in part to underperformance in Apple's flagship product. The company has indicated that the second quarter is traditionally an off-peak season, with major products transitioning between old and new models. However, Hon Hai expects to see both quarter-on-quarter and year-on-year growth during this period.

Challenges and Predictions

Despite the positive sales report, Hon Hai faces challenges in boosting its iPhone-related revenue in 2024, as highlighted by Bloomberg Intelligence. The first quarter's downbeat demand for iPhones and the uncertainties surrounding the broader market could pose risks to Hon Hai's margins, especially given the company's significant reliance on iPhone production. Additionally, Apple's steady capacity relocation to India may impact the scale economies within Hon Hai's iPhone business. Nonetheless, Apple remains optimistic about its sales prospects, expecting a low single-digit percentage increase in sales for the current period and predicting double-digit growth for its iPad and services business.

Street Views

• Steven Tseng, Bloomberg Intelligence (Neutral on Hon Hai):

  "Hon Hai may face hurdles boosting its iPhone-related revenue in 2024 given 1Q’s downbeat demand and the swirl of unknowns clouding the broader picture. Despite being the iPhone’s largest producer, Hon Hai’s margins may be at increased risk from diminished scale economies within the iPhone business, and the steady capacity relocation to India."