by BLOOMBERG

BEIJING • Hon Hai Precision Industry Co posted a surprise fall in earnings amid technical hiccups that disrupted production of Apple Inc’s 10th-anniversary iPhone.

Apple’s main device-assembler reported a decline in net income to NT$21 billion (RM2.92 billion) in the three months ended September. That compared to the NT$37.2 billion projected.

Apple’s decision to adopt technically demanding facialscanning sensors for the iPhone X initially stymied some suppliers and held back Hon Hai’s business in turn. The US company was said to have struggled to crank out enough of its priciest and most in-demand model for the crucial holiday period. And it continues to grapple with a dearth of suppliers capable of making organic light-emitting diode or OLED displays.

The growing market share of Chinese rivals from Huawei to Vivo also weighed on Hon Hai’s performance, given many assemble their own devices. And while worldwide smartphone shipments grew 5% in the September quarter, that was driven by demand for cheaper handsets in emerging markets, according to researcher Counterpoint.

The linked trends of growing competition and vendors’ search for assembly alternatives jeopardise the company’s near-term outlook, Taiwan Ratings analysts Raymond Hsu and David Hsu wrote in a report ahead of the earnings. Against that backdrop, its acquisitiveness, seen most recently in an attempt to get in on the bidding for Toshiba Corp’s memory chip division, was another concern.

“Growing signs that Hon Hai is attempting large-scale acquisitions may also hurt the balance sheet,” the two analysts wrote.

Still, the iPhone X should become a key earnings driver for Hon Hai as Apple untangles snags in its supply chain. — Bloomberg