The world’s largest electronics manufacture Hon Hai, better known by the name of Foxconn, is probably best associated with Apple. This is probably the only reason you know of the company and it is for good reason that when you think of Foxconn Apple comes to mind. The manufacture draws an estimated 60 to 70 percent of its revenue from assembling gadgets and other work for the fruit company.
According to a recent report from Reuters, however, the company has been struggling to grow and is at risk of losing orders to rival Pegatron. Analysts are saying that Pegatron offers more competitive pricing – at the expense of lower margins – and appears to be succeeding in pulling in more orders from Apple. Pegatron currently makes older models for Apple, including the iPhone 4S and iPhone 4, as well as the iPad mini.
Considering Apple’s margins have been slowly increasing, the fruit company will do everything in its power to lower them and switching some of their component orders to Pegatron could make sense. If you remember correctly, we reported that Pegatron would be increasing its workers in China by up to 40% in anticipation of the cheaper entry-level iPhone as well.
“Pegatron posts a long-term risk to Hon Hai because as it catches up on margins by supplying more components, it can provide more aggressive pricing,” Daiwa Capital analyst Birdy Lu said. “Hon Hai’s margin uptrend is not a guarantee.”
Foxconn’s profit has been on a decline and there is many rumors for this such as decreasing demand for the iPhone. Furthermore, the manufacture is having a hard time growing due to Samsung’s dominant hold on the smartphone market. Coupled with increased competition from Pegatron, things aren’t looking up for Foxconn who is expected to have a flat revenue this year at best.