Foxconn International Holdings Registers $226 Million Loss Due To Dismal Phone Orders

Foxconn International Holdings Ltd, a Foxconn Technology subsidiary, reported a $226.07 million loss, its highest-ever first-half net loss. Even though it is the largest contract maker of mobile phones in the world, it is largely dependent on the results of its partners. Important clients such as HTC, Nokia, Huawei, Sony Mobile and Motorola posted very disappointing results. As a result, Foxconn International Holdings suffered a decline of manufacturing orders. Last year, the company suffered a much smaller $18 million loss.

It is important to note that Foxconn International Holdings does not manufacture Apple, Microsoft, Amazon or Nintendo products — those devices are manufactured by Foxconn Technology.

At the same time, Foxconn International Holdings’ shares dropped nearly 8% in the Hong Kong Stock Exchange. Its market cap has fallen around 45 percent in six months. The company plans to automate certain parts of its activities, a move that will probably lead it to lay off some of its employees.

Yet, that loss is related to the current outlook for mobile phone companies. Apart from Samsung and Apple, all vendors announced disappointing results over the last six months. Nokia’s operating loss nearly doubled to €826 million ($1.01 billion) for Q2 2012, HTC’s profit was down 70% to NT$4.4 billion ($149 million) for Q1 2012, Sony Mobile posted a $312 million loss for its latest quarterly earnings and is laying off 1,000 people, and Motorola, which has been part of Google for a year, has suffered an operating loss of $233 million for Q2 2012 — its largest-ever. RIM and LG devices are not manufactured by Foxconn International Holdings, but follow the same worrisome trend.

According to Gartner, sales of smartphones were up by 42.7% to 154 million units in Q2. Even more important, overall profits are following the same curve. But Apple and Samsung together accounted for 83% of all smartphone sales. That dichotomy is the source of Foxconn International Holdings’ loss.

Of course, Foxconn International Holdings is nice enough to blame the global economic slowdown while lowering its expectations for the holiday season, so it is still not confident that its partner vendors will recover.