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"Notable" slowdown at Foxconn manufacturing concerns Apple (Updated)


A slowdown in Foxconn's manufacturing may have a negative impact on the future supply of Apple products. According to Alex Guana of JMP Securities, "Hon Hai's (Foxconn) growth decelerated from 84% (year over year) in the month of December to 37% in January and then again to 26% in February."

The reasons for this deceleration are not known, but the slowdown is concerning enough that JMP has downgraded its outlook on Apple from "Market Outperform" to "Market Perform." This unfavorable assessment is not based on the quality of Apple's products, but on Foxconn's ability to deliver an increasing number of Apple products in a timely manner.

For the past year, Apple has struggled to meet demand for its popular smartphone and tablet. Both the original iPad and the iPhone 4 were plagued by shortages that forced the Cupertino company to delay the international launch of the iPad and rollout the iPhone 4 slowly to new carriers worldwide.

Apple's recent earnings conference call confirmed iPhone 4 supplies are still constrained, and a slowdown by Foxconn may exacerbate this problem. It is worthy to note that this report does also consider the negative impact of the Japanese earthquake on the global supply of NAND flash and other electronics components. Until production levels in Japan can be restored, the next few months may be rough for Apple and its fans.

Update: Another analyst cited by AppleInsider refutes this negative conclusion put forth by Gauna. Analyst Yair Reiner of Oppenheimer & Co. points out that Apple accounts for only 20% of Hon Hai's total sales. The link between the two companies is so small that any slowdown in Foxconn's growth will have no effect on Apple. Reiner writes, "The correlation between Apple and Hon Hai's revenue therefore appears to be a product of coincidence more than causality."

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