Foxconn's third-quarter profit tumbles after iPhone X production hurdles

Taiwan-based Foxconn posted a drop of 39% in quarterly profit, which was much worse than was expected, as the assembler for products by Apple saw its margins become squeezed by bottlenecks in production for the new iPhone X.

Although the iPhone 8 kicked off sales in September in line with its previous new phone launches, demand was lacklustre as consumers waited for the iPhone X.

Foxconn, formally known as Hon Hai Precision Industry Co, said third-quarter net profit tumbled to T$21 billion ($700 million), some 42 percent below an average estimate of seven analysts polled by Thomson Reuters I/B/E/S. Revenue for the quarter was flat.

Another big suspected barrier to higher production yields is Face ID - the new biometric authentication system which does a 3D scan of a user's face and replaces the fingerprint scanner (Touch ID) on the iPhone X. At the end of October, Bloomberg reported that Apple supposedly instructed suppliers to reduce the accuracy of Face ID in order to increase supply, a claim which was subsequently denied by Apple. Apple itself is expected to set an all-time revenue record in the holiday quarter, predicted to sell more than 80 million iPhones.

Hon Hai's fourth-quarter results should improve on sales of the iPhone X, which appears to be strong so far, analysts say.

Therefore, said the analyst November and December should help, but still will feel an impact overall during the final quarter.

Unfortunately, due to the supply issues related to essential parts for the iPhone X, the firm was not able to manufacture as numerous devices as initially thought.

Some analysts also attributed the profit slide to an appreciation in the value of the yuan as well as to labour idled due to a later-than-usual launch for Apple's new smartphone.

Foxconn shares fell by up to 2.8% Wednesday underperforming the broader market in Taiwan which was off by 0.5%. While the sales of the phone are not the primary concern for the tech company, what is important is that components used to make up the iPhone X suffered from production constraints.

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