(Bloomberg) -- Hon Hai Precision Industry Co. warned revenue will decline for the third straight quarter, spurring concerns about demand for Apple Inc.'s latest iPhone and consumer electronics.
The world's largest assembler of iPhones posted a surprise 11% rise in net income to NT$43.13 billion ($1.3 billion) for the third quarter, but that was boosted by a non-operating income gain of NT$11.1 billion from subsidiaries, interest and foreign exchange. It forecast sales will decline during the holiday quarter.
Taipei-based Hon Hai, the main public arm of Foxconn Technology Group, gets more than half of its business from Apple. The iPhone 15 series, released in September, has fallen shy of its predecessor in China ahead of the crucial end-of-year shopping season.
The assembler lowered its outlook for its components business to flat relative to last year, after previously forecasting growth. Apple warned this month that revenue in the December quarter will be about level from 2022 as the company grapples with an unexpected challenge from Huawei Technologies Co. and an increasingly hostile business environment in China.
Read more: IPhone Maker Hon Hai Cuts Outlook After Mobile Demand Sags
The Taiwanese company's revenue is expected to drop about 4% in the fourth quarter, according to analysts' estimates. Sales in 2023 are estimated to fall 6.3%, which would mark the first yearly revenue contraction since 2016. That follows a 12% dive in revenue from July to September.
Apple and Foxconn both face growing challenges in China. Beijing has expanded bans on iPhones to government-backed agencies and state-owned enterprises, while new 5G handsets from Huawei are providing fresh competition.
Meanwhile, China began a probe into Foxconn's tax issues and land use in the country after founder Terry Gou announced his bid for Taiwan's presidency. Foxconn makes the bulk of Apple's handsets from the central Chinese city of Zhengzhou.
Asked about the impact of the probe, Chief Financial Officer David Huang said operations were normal in China. Chairman Young Liu said it was Gou's “right to” run for president and the company was preparing for all eventualities related to political risk. Taiwan on Tuesday approved Gou's candidacy, though he still has to register to run.
Liu didn't specify what contingency plans Foxconn was considering. His company is trying to find new growth drivers beyond a core gadget assembly business that renders razor-thin margins and relies heavily on China for manufacturing resources. It's branched out to emerging fields including electric vehicles and low-Earth orbit satellites, although these new ventures have yet to generate significant revenue for the company.
(Updates with executives' comments from the 9th paragraph)
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