Hon Hai shares tumble on iPhone order cut report

Taipei, Nov. 20 (CNA) Shares of Hon Hai Precision Industry Co., a major iPhone assembler, came under heavy pressure Tuesday morning after Apple shares plunged overnight on a report that Apple has cut back orders for its latest iPhone models, dealers said.

Selling in Hon Hai also spread to other "Apple concept stocks" amid worries that poor shipments of the three latest iPhones -- the iPhone XS, the iPhone XS Max and the iPhone XR -- will affect their sales, they said.

As of 12:13 p.m., shares of Hon Hai had fallen 3.13 percent to NT$71.10 (US$2.30) with 29.63 million shares changing hands on the Taiwan Stock Exchange, where the benchmark weighted index was down 0.89 percent at 9,740.54.

After Apple shares fell about 4 percent on Wall Street overnight, Hon Hai shares came under immediate pressure when the market opened, and selling then escalated to pull down not only Hon Hai but other Apple suppliers, dealers said.

"Apple is a very important client to Hon Hai," Concord Securities analyst Kerry Huang said. "It was no surprise that the report on the order reduction for the new iPhones prompted investors to dump the stock and other Apple suppliers in Taiwan."

The Wall Street Journal reported Monday that due to weaker than expected demand for the three new iPhones, which were unveiled in September, Apple has cut orders to its suppliers, in particular for the more affordable iPhone XR model, in recent weeks.

"I think the weaker than expected demand for the new iPhones came from lower shipments to China, dealing a big blow to Apple and its suppliers like Hon Hai," Huang said.

Among other falling Apple suppliers, smartphone camera lens maker Genius Electronic Optical Co. had fallen 1.76 percent to NT$194.50, and printed circuit board producer Flexium Interconnect Inc. had dropped 0.76 percent to NT$78.20.

Bucking the downturn, another smartphone camera lens supplier, Largan Precision Co., had added 0.15 percent to NT$3,240.00 as of 12:13 p.m.

"Hon Hai could have some technical support at around NT$70.00 but if it cannot sustain itself above that level, the stock is likely to test NT$68.1, the day's low of Oct. 17," Huang said.

Foreign institutional investors sold a net 60.91 million Hon Hai shares in the previous 11 trading sessions in a row after a net sell of 11.54 million on Monday.

Analysts warned the slower iPhone sales could hurt Hon Hai's gross margin over the next few quarters.

In the third quarter, Hon Hai's gross margin was 5.87 percent, up 0.24 percentage points from a quarter earlier, its operating margin rose by 0.81 percentage points to 2.28 percent, and net margin also rose to 1.81 percent from 1.62 percent.

Hon Hai posted a net profit of NT$24.88 billion in the July-September period, up 42.23 percent from a quarter earlier on an increase in shipments and efforts to cut operating costs.

It reported earnings per share of NT$1.57, compared to NT$1.01 in the second quarter.

Hon Hai's net profit in the first nine months, however, was down 0.94 percent from a year earlier at NT$66.45 billion.

Source: Focus Taiwan News Channel