On Thursday (Aug. 11), Foxconn reported second quarter net profits that were down 31 percent compared to the year-ago period. The decline in profit was due to a decline in iPhone sales. For the quarter, net profit was $566 million, down from $822 million in the year-earlier period. Analysts, according to The Wall Street Journal, had expected Foxconn to weigh in with profit of $764 million. Apple had been enjoying year-after-year growth for a long time, but in the last two quarters, growth slowed as the market for smartphones is starting to get saturated. It’s also facing increased competition from Samsung Electronics with its Galaxy 7 line of phones and cheaper ones manufactured in China.
“Apple ordered fewer units from Foxconn than expected in the second quarter,” a person familiar with the issue said in a report. “Foxconn thinks there is little it can do about the falling demand in the short term and, right now, is trying to plan for longer-term growth.”
Back in June, at the company’s annual shareholder meeting, Terry Gou, chairman of Foxconn, told investors that the company is facing a difficult business environment and that it is focusing on investments going toward new technologies and cutting costs at Sharp to make it profitable. In conjunction with its second quarter earnings report, Foxconn also received the green light from Chinese antitrust officials to buy Sharp in a deal that is valued at $3.8 billion. Under the terms of the deal, which was announced in March, Foxconn will get roughly two-thirds of Sharp.