Apple suppliers Foxconn and Japan Display both report disappointing financials

Two Apple suppliers, Foxconn and Japan Display, have both reported disappointing financial results today.

Weaker-than-expected demand from Apple was cited as one of the reasons …

Reuters reports that Foxconn’s profits dropped dramatically, and were well below market expectations.

Shares of Foxconn, the world’s largest contract manufacturer, dropped more than 2% on Wednesday after the company posted a lower-than-expected quarterly profit.

Foxconn, formally known as Hon Hai Precision Industry Co Ltd, reported a net profit of T$19.82 billion ($637.26 million) for the first three months of 2019, down 17.7% from the same period a year earlier.

The result lagged the T$24.84 billion average of eight analyst estimates compiled by Refinitiv.

Separately, the same source cites weaker demand from Apple as a reason for Japan Display continuing to lose money.

Cash-strapped screen maker Japan Display Inc on Wednesday posted a ninth consecutive quarterly net loss, hit by weaker-than-expected demand from Apple Inc, its biggest client.

The company, which is pursuing a bailout deal with a Chinese-Taiwanese group, said its fourth-quarter loss was 98.6 billion yen ($899.22 million), compared with the 147 billion yen loss a year earlier.

For the full year, the net loss totaled 109.4 billion yen, far worse than an average estimate of a 13.47 billion yen loss from six analysts surveyed by Refinitiv. It was the fifth straight year of loss.

We shouldn’t necessarily read too much into either result. Foxconn now has a reasonably diverse range of clients, so its performance can’t be relied on as a direct proxy for iPhone sales. And Japan Display currently only makes only LCD screens for Apple. Since the signs point to the iPhone XR selling well, that suggests weakened demand for older models – the iPhone 8 and earlier. Foxconn and Japan Display each have their own issues, the latter the subject of a massive rescue plan as it belatedly moves into the OLED market, winning Apple Watch display orders for later in the year.

Apple’s own share price took a hit in response to concerns about new tariffs on Chinese imports, and a Supreme Court ruling opening the way to an antitrust lawsuit in relation to the App Store. It did, however, claw back some of the loss during yesterday’s trading.