Cellular News reports Foxconn saw a huge 56% drop in profits during the first half of this year. Cellular News wrote:
Contract handset maker Foxconn International Holdings said Wednesday its first-half net profit fell 56% from a year earlier, on higher operating costs, changes in its product mix, and increased investment spending.
The company, which makes mobile phones for companies such as Motorola and Nokia, posted a net profit of US$142.2 million for the six months ended June 30, down from US$324.0 million a year earlier.
The result was lower than the average US$256 million forecast of five analysts polled by Dow Jones Newswires.
The blue-chip company said its first-half revenue rose 4.4% to US$4.79 billion from US$4.59 billion a year ago.
Foxconn said in June it expects its gross profit margin to fall this year because of a price war, as well as higher costs and corporate taxes in China.
Rising costs in China, as we have repeatedly reported, is making China a less attractive investment environment. We highlighted the need for companies to search for other countries to invest in in China + 1 Strategy: The Pitfalls and the Promise . As we noted then many countries were looking to Vietnam but with recent labor unrest and an inflation rate of 27% even Vietnam is becoming less attractive. As for the price war, well it is to be expected. Foxconn however are a big and tough company and should pull through it OK but if market demand doesn't pick up and big clients such as Motorlola don't get their act together, Foxconn might face a more challenging ride over the short term.
At least they will always have iPhone Girl.
Cellular-News: Foxconn International 1st Half Net Profit Falls 56% to US$142.2 Million
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