Apple Assembler Profit Beats, Signaling Strong iPhone 11 Demand

Bloomberg

Published Nov 13, 2019 02:00AM ET

Updated Nov 13, 2019 04:14AM ET

(Bloomberg) -- Hon Hai Precision Industry Co. (TW:2317) reported quarterly profit above analysts’ estimates, indicating solid demand for Apple Inc.'s (NASDAQ:AAPL) iPhone 11 range.

The assembler of most of the world’s iPhones and iPads posted net income of NT$30.7 billion ($1 billion) for the September quarter, compared with an average estimate of NT$27.7 billion.

Apple last month forecast holiday revenue that surpassed Wall Street’s projections, suggesting healthy appetite for iPhone 11 models with lower entry prices and vastly improved cameras. It’s now said to expect iPhone shipments to return to growth in 2020 when it finally introduces its own 5G devices -- a boon to hardware suppliers such as Hon Hai and chipmaker Taiwan Semiconductor Manufacturing Co. coping with a decelerating smartphone market.

“The lower pricing of the iPhone 11 has been effective in driving demand past the Street’s expectations,” Sean Lin, an analyst at President Capital Management Corp., said in a Nov. 4 note.

Assembly partners like Hon Hai and TSMC typically begin gearing up for production weeks, if not months, ahead of a device’s commercial launch. The outlook for Apple and its suppliers remains overshadowed by an ongoing trade war. AirPods, Apple Watch, HomePod and other devices made in China have been hit with 15% tariffs, and U.S. President Donald Trump hasn’t ruled out the possibility of a levy on iPhones starting Dec. 15.

Hon Hai, which gets half its revenue from its Cupertino, California partner, previously reported NT$1.38 trillion in sales for the September quarter, barely changed from a year earlier according to Bloomberg’s calculations off monthly revenue numbers. Its shares closed down 1.4% ahead of the earnings on Wednesday, after gaining 27% this year.