Foxconn posts $218 million full-year net loss

Foxconn posts $218 million full-year net loss

Summary: It seems that making stuff for other companies isn't as profitable as it once was. Foxconn, which builds gadgets ranging from motherboards to iPhones, has posted a $218 million full-year net loss, exceeding analyst's expectation of a loss of around $202 million.

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It seems that making stuff for other companies isn't as profitable as it once was. Foxconn, which builds gadgets ranging from motherboards to iPhones, has posted a $218 million full-year net loss, exceeding analyst's expectation of a loss of around $202 million.

Foxconn is blaming higher manufacturing overheads, higher taxes and increased competition.

Here's the press release:

MANAGEMENT DISCUSSION AND ANALYSIS

Review of Results and Operations

The year 2010 was an extremely difficult year for us. We saw major changes in the handset ecosystem triggered by entry of new players, introduction of new software and applications, as well as emergence of new business models. Market dynamics shifted drastically and created tough challenges for some industry players as well as the Company.

Despite our continual efforts to further diversify customer base and sources of revenue, the operation results for the Company concluded less than satisfaction. Revenue for the year 2010 was US$6,626 million, which represents a change of US$588 million, or 8.2% less than the prior year revenue of US$7,214 million.

The intensifying market share struggles among global OEM brands had made the global handset EMS market difficult and caused pricing pressure for the Group's products. Higher manufacturing overhead resulting primarily from lower utilization of facilities and relocation, changes in product mix, impairment losses, continued long-term investment in research and development activities as well as higher consolidated income tax also affected our financial performance. Loss for the year 2010 attributable to equity holders of the Company was US$218 million, representing a decline of 659% over the profit for prior year amount of US$39 million. Basic loss per share for the year 2010 were US3.06 cents.

In 2010, we continued to execute our capacity re-location programs, which commenced in the latter part of 2008. These efforts were set out to right size the cost and scale of our operations in order to cope with the challenges in our business. In PRC, we continued to focus on expansion in Langfang, Beijing and Tianjin, while reducing our exposure in the higher cost areas. We initiated discussions with Hon Hai group companies to transfer some less utilized assets to satisfy their growing demand and trim down our fixed costs. Outside of the PRC, we also reviewed our local business opportunities and constantly looked to improve profitability of our various sites. Some of these cost streamlining actions took longer than we had expected and thus created unfavorable impact to our financial performance. Relocation and downturn of our business also generated asset impairments that hit our bottom line.

While the cost optimization efforts persisted, we did not slow down our R&D investments. Our investments in design engineering resources for smart phones started to see good progress in 2010. It is our belief that we have built respectable capabilities in this area which will help our customers tremendously in enriching their product portfolio and shortening their products' time to market. Smart phones have generated strong growth momentum in the market and we believe our investments in this area will prove to be vital for our future.

Outlook

Looking ahead to 2011, our alarming setback in 2010 has created a sense of urgency in the organization. We need to change as the market is changing and our customers are changing. We need to take decisive actions to conclude our capacity re-location, optimize our cost structure and return to profitability. As part of the efforts for resources consolidation, we have discussed with Hon Hai group to sell our Taiyuan legal entity and its assets to them. Subject to independent shareholders' approval and completion of the transaction, we believe it will help us in reducing our fixed costs for operation while allowing Hon Hai to further expand in the Taiyuan area. We need to serve our existing customers better and approach more new customers. As smart phones become the mainstream of the market, we believe our end-to-end solutions from design to manufacturing and services put us in a leading position in the market place.

Employees

As at 31 December 2010, the Group had a total of 126,687 (2009: 118,702) employees. Total staff costs incurred during the year 2010 amounted to US$565 million (2009: US$485 million). The Group offers a comprehensive remuneration policy which is reviewed by the management on a regular basis.

Topics: Smartphones, Hardware

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  • The truth revealed

    Attention stupid people: this is why those "high paid manufacturing jobs" are never returning. You can't even make stuff in China anymore without losing your shirt, and that's with your employees stacked like cordwood in company dormitories in company towns.

    Manufacturing used to add a lot of value, because it required highly skilled people doing careful work in order to do it properly. Now machines do the work, and all the people do is watch to make sure the machines haven't caught fire. There's no skill in that, no value-added, and most certainly no high pay.

    Any politician who talks about "high paid manufacturing jobs" is a crook and a liar. Even the <I>Chinese</I> politicians who talk about high-paid manufacturing jobs are crooks and liars.
    Robert Hahn
    • It's not their fault

      @Robert Hahn
      it's ours for not buying enough stuff! :)
      Will Farrell
    • First it is not &quot;high paid&quot;, it is &quot;so so paid&quot;

      @Robert Hahn
      Even so, salary still higher than most service sectors like walmart.

      Second, look at how China got trillion dollar cash sitting in its bank account, and US got trillion dollar debt because of losing manufacturing jobs.

      When you are in 10% unemployment rate, stop calling other liar.
      FADS_z
      • Parakeets for hire

        @FADS_z Yeah, I know, those jobs aren't dead; they're just pining for the fjords.
        Robert Hahn
      • Stupid analysis...

        Look, our debt didn't come as a result of us losing our manufacturing jobs. The debt came mostly from the overspending by government with its massive social program spending. The 10% unemployment, again, came as a result of our being uncompetitive against others because, our government made our businesses uncompetitive with massive and costly regulations, which our foreign competition doesn't have to worry about. And then, there are the unions which demand salaries which are 10 or 20 times what the foreign labor get, and then you have to take into consideration the heavy taxation which puts us at a bigger competitive disadvantage.

        Learn the facts, or you will forever sound foolish and ignorant.

        When you point at us losing our manufacturing jobs, you're looking at it as a the cause, but it's actually a result, and it's the result of government actions, which put us at a big disadvantage.
        adornoe
      • RE: Foxconn posts $218 million full-year net loss

        @adornoe@...<br><br>WoW! So it wasn't the banks or the greedy financial sector or expensive unnecessary wars. It was the government taking care of its citizens and those bloody workers asking for subsistence wages.<br><br>Perhaps we could pay them nothing, I believe you tried that once in the US.<br><br>Seriously, how does it feel to be so far out of touch?
        tonymcs@...
      • RE: Foxconn posts $218 million full-year net loss

        @adornoe Are you serious? Social spending in the US is nothing compared to the overall military spend and budget. The US is full of a bunch of "all about me" people who live their pathetic lives glued to the TV for information and moral guidance.

        Back to the topic - manufacturing is being automated and commoditized - this has been happening for years - it's no big suprise. Foxconn is making little because, unfortunately, people were killing themselves and when you apply the theory behind moral and social responsibility the pure capitalistic thinking cardhouse comes tumbling down.

        It's all a game.
        jessiethe3rd
      • tonymcs: Try to read for understanding

        <i>WoW!</i>

        Wow! So, I have to re-iterate my position in order for you to understand?

        <i>So it wasn't the banks or the greedy financial sector or expensive unnecessary wars.</i>

        Heck, NO!

        While it may be true that there will always be crooks and greedy people in the private sector, in any industry, most of the blame for what happened to the economy does not belong with the private sector. If the foundation for the greed and the crookedness had not been put in place by the government, then chances are that the economic collapse would never have happened. Read again where I mention the foundation for the crookedness, starting with Fannie Mae and Freddie Mac and the Community Reinvestment Act, and then follow that up with looking up how the democrats in congress blocked Bush from trying to implement regulations against the out of control mortgage and financial industries.

        <i>It was the government taking care of its citizens and those bloody workers asking for subsistence wages.</i>

        It is not the business of the federal government to regulate "working wages"; that's the business of the private sector industries, and if any government needs to be involved, it's at the local levels, namely the state and county and city/town levels.

        <i>Perhaps we could pay them nothing, I believe you tried that once in the US.</i>

        Yet, when government tries to issue more regulations against industry, the repercussions are the opposite of what government leaders expected. As an example, every time wage legislation is passed dictating what industry is going to have to pay, industry responds with laying off people, or reducing the pay of the higher paid staff, or sometimes going out of business, offshoring their operations and/or their jobs, or simply closing down shop. Repercussions: something that liberals are completely incapable of understanding, or don't care to understand, or don't want to pay attention to.

        <i>Seriously, how does it feel to be so far out of touch? </i>

        Seriously? Have you looked around what's been happening in the country? Have you been asleep the last 4 years? Are you one of those that doesn't understand the meaning of "repercussions"? How much more blind can someone be? If you're not blind by nature, then you're blind by choice. And there is no one more blind than someone who refuses to see.

        What happened to the economy and to the country in the last few years took many years to build up until we had the crash. And what happened to us was the creeping socialism which so many continue to deny has hurt the country. So, what caused our economic downturn? It's the socialism, stupid!
        adornoe
        • jessiethe3rd: You must be the typical unthinking liberal

          who doesn't understand cause and effect. <br><br><i>Are you serious?</i><br><br>Serious as a heart attack. So, what part of what I said is beyond your comprehension skills?<br><br><i>Social spending in the US is nothing compared to the overall military spend and budget.</i><br><br>Wrong approach for the argument!<br><br>The fact is that, when it comes to what government spends money on, the defense budget is the only one that matters and the only one that the federal government has a responsibility to fund. Social spending was not the original intention of the founding fathers and it wasn't refereed to in the constitution. So, if the feds were to have to choose between social spending and military spending, the only choice available under the constitution is for defense spending. Everything else would have to be cancelled, and that includes all social spending. Social spending is not what was intended with the "commerce clause", and social spending is not part of what was meant by "infrastructure". <br><br><i> The US is full of a bunch of "all about me" people who live their pathetic lives glued to the TV for information and moral guidance.</i><br><br>That really sounds like the 35% who have become wholly dependent upon government for their livelihood. What you mentioned is not about private industry at all. Private industry is the provider of the funds that government and so many dead-beats have become so dependent upon. So, when it comes to the "pathetic lives" you must be referring to those dead-beats who have become leeches against the productive sectors of society.<br><br><i>Back to the topic - manufacturing is being automated and commoditized - this has been happening for years - it's no big suprise. Foxconn is making little because, unfortunately, people were killing themselves and when you apply the theory behind moral and social responsibility the pure capitalistic thinking cardhouse comes tumbling down.</i><br><br>That's a pretty stupid statement and a very stupid analysis. <br><br>Capitalism is what made the U.S. the greatest economy in the history of the world. No other economic system has ever matched it, and no other economic system can ever match it. However, with the creeping socialism, with "distribution of the wealth" and with so much government spending on social programs, we have stopped practicing free-market capitalism the way we used to, and we're now paying a very heavy price for that. Government spending is out of control, and the economy cannot produce enough in order for government to be able to balance it's budget, and the federal debt continues mounting, where we will be approaching some $15 trillion in debt at the end of 2011. With so much spending and with government trying to extract more wealth from the private sector, the economy will just continue to shrink and the debt will get even higher and companies will have to go out of business and people will have to get laid off. Some people might be looking at the "official" jobs numbers that were released on April 1st (April fool, anyone), and conclude that, the economy is getting better and actually growing. But, what those numbers fail to count is the number of people who were looking for work and got frustrated looking and finally gave up looking. Furthermore, the people receiving unemployment checks, which is in the many millions, are also not counted. And, amongst those who are "employed", many millions of those are "underemployed" or working part time jobs. The unofficial unemployment number, which is the real unemployment number, should be between 18 and 20%. With that kind of figure, it's clear that we're in deep doo-doo, and the worst of the downturn is still to come.<br><br>So, why not get really informed and stop being so ignorant about what's really happening around you?<br><br>

          <i>It's all a game.</i>

          Apparently, the only one not taking the economic situation and the general situation of the country seriously is you and your fellow democrats.

          When the country is in a very dangerous situation, it most certainly is no game.
          adornoe
    • RE: Foxconn posts $218 million full-year net loss

      @Robert Hahn

      Actually, in many cases outsourced manufacturing goes from a highly automated system to using lots of human labor. The idea being, with cheap labor, that it is easier to re-train people that it is to re-build and re-train machines. Agile Methodology they call it.

      As far as "high paid" it's all relative. A US manufacturing job was indeed quite high paying relative to the standards of much of the world.
      SlithyTove
      • Vote for me, I can do magic

        @SlithyTove Does it matter what U.S. wages once were in this field? If you can't make money paying Chinese wages, you certainly can't do it in the U.S.

        The manufacturing function is no longer where the value is added. When any biped from the forest can, with the aid of machines, "manufacture" things, there isn't going to be any money in that activity. The money will be in design, services, content, and content delivery.

        People have this fantasy that if only our politicians would throw The Magic Switch, jobs that don't make money at Chinese wages will somehow move back to the U.S. and pay high wages. No one should expect that, or believe it.
        Robert Hahn
      • RE: Foxconn posts $218 million full-year net loss

        @SlithyTove - "paying relative to the standards of much of the world".

        So when banks and large companies then demand to be bailed out because they want things both ways, why should taxpayer funds be given out? Taxation without representation"? If the top 1% can be bailed out, so can the remaining 99%, especially as we don't try to make end-runs around the system in order to increase our profit margins.
        HypnoToad72
      • RE: Foxconn posts $218 million full-year net loss

        @Robert Hahn <br><br><i>The manufacturing function is no longer where the value is added. When any biped from the forest can, with the aid of machines, "manufacture" things, there isn't going to be any money in that activity. The money will be in design, services, content, and content delivery.</i> <br><br>There is certainly still value add to had in manufacturing. After all, all those designs and plans aren't much good if you don't have a final product. The ability to make stuff matters. But the value of unskilled labor is pretty linear. It was only as valued in the US as it was due to its historically-unusual scarcity. That scarcity is evaporating, but minimum wage prevents wage levels from falling to a point where manufacturing in the US would be economical again.<br><br>But I think we are coming to another crossroads. The primary beneficiaries of the industrial revolution were unskilled labor. Skilled labor and educated labor have always done well for themselves.<br><br>Right now, an "unskilled" human is still much better than a machine at certain kinds of tasks. Our vision and spatial perception, our generalized dexterity, and our relatively easy "re-programmability". When we solve those technical hurdles, unskilled labor is completely screwed.
        SlithyTove
      • RE: Foxconn posts $218 million full-year net loss

        @HypnoToad72

        <i>So when banks and large companies then demand to be bailed out because they want things both ways, why should taxpayer funds be given out?</i>

        When referring to the banks the answer as to why we had to bail them out is because things would get very very bad for everyone otherwise. Bailing out the banks was the correct decision.

        What was NOT the correct decision was giving everyone who got the banks into that mess a free ride. They got to keep all the profits from their idiocy, got bailed out, and have no disincentive against trying it again. What the banks have learned is that they hold the economy hostage and can do as the please without repercussion.
        SlithyTove
      • SlithyTove: You're looking at the wrong enemies when you point at the banks

        while the real enemies, who created the mess to begin with, is getting a pass.

        Look, without the government regulations that created Fannie Mae and Freddie Mac, and which passed the Community Reinvestment Act (CRA), we would never have gotten into the financial and mortgage mess that caused the economic collapse.

        Sure, there are greedy people in the financial and banking sectors, but, without the inducements to cheat which were provided by Fannie and Freddie, the corruption in the banking/financial sector would very likely have never happened.

        Government is front and center in what occurred, and people need to get informed about it. So, why are you giving government a pass, when they were instrumental in creating the problems?
        adornoe
      • RE: Foxconn posts $218 million full-year net loss

        @adornoe
        Oh I get it - you're the great defender of the Milton Friedmen theory behind self correcting markets. Let's just say this - as we found out with Russia's pure communist system - pure anything does not work. People by nature are corrupt. Don't get me wrong - the government had a part to play in the financial melt down but most of that was at the urging of deregulation and the great work Alan Greenspan did leading up to the crisis. In a pure capitalistic world there are only to things you can pretty much count on... Boom & Bust.

        What the banking industry, wallstreet, and the puppet government are embarking on is destablization of the establishment... spreading of capitalism and "democracy" to push forward an agenda. This is nothing new - the US is weak with budgetary constraints, new "important" terrorism issues, and unemployment... meanwhile more money is being fleeced for the spread of the cause.

        It's a joke.
        jessiethe3rd
      • RE: Foxconn posts $218 million full-year net loss

        @adornoe

        <i>So, why are you giving government a pass, when they were instrumental in creating the problems? </i>

        Who said anything about giving government a pass? The creation of Fannie and Freddie was one, sure, though that institution was able to run for a very long time without incident. Some of the more recent government de-regulations allowed banks to get away with far more and really got that ball rolling. There was also plenty of pressure on those institutions from the side of the government who thought everyone should own a house no matter what.

        But if government handed them the rope it was still the bankers that strangled themselves with it. Quants coming up with all kinds of bizzare ideas that were so confusing and impossible to track that even the banks themselves had no idea what was going on half the time.
        SlithyTove
      • jessiethe3rd: It's not possible to be more ignorant than you seem to be

        <i>Oh I get it - you're the great defender of the Milton Friedmen theory behind self correcting markets.</i>

        Look, I don't care about names, or theories. I care about the free market system, and that system involves what we know as capitalism.

        And, without government intervention, the markets always do self correct. Any company that doesn't serve the public and which violates the rules of capitalism and which also violates the rules of society, will be brought to its knees and oftentimes will end up having to close shop. We've seen companies come and go quickly when they're not serving the people, who are the final judges who determine who stays and who goes. If a bank or tech company treats its customers like trash or doesn't produce the expected service or product that a customer wants to buy, then that service or company won't be around for long. That's a self-correcting market. It's the law of survival of the fittest applied in the free-market.

        <i>Let's just say this - as we found out with Russia's pure communist system - pure anything does not work.</i>

        Communism and socialism have never worked. It has nothing to do with being "pure". And, nobody has ever had real expectations in real life or society or government for purity. That's a non-argument and serves no purpose.

        <i>People by nature are corrupt.</i>

        Yet, most others would say that, most people are good by nature. But they can succumb to corruption. No one is perfect, but most people are not corrupt. You must've come from one of those alternate universes I keep hearing about, where good is bad, and bad is good.

        <i> Don't get me wrong</i>

        I don't get you wrong. You got wrong all by yourself. But, you can get right by getting informed.

        <i>- the government had a part to play in the financial melt down</i>

        Government had the biggest role in creating the economic meltdown. Nobody that knows anything would deny that. Only the ignorant would blame the corporations and the banks. The crooks and greedy in society cannot cause such a huge economic meltdown; only government is capable of creating so much damage.

        <i>but most of that was at the urging of deregulation</i>

        Total nonsense!

        Deregulation is what most people want and what most corporations are urging. Without deregulations, no real economic growth is possible. The general trend, with intrusive regulations, is further economic downturns, with tiny blips of growth here and there which might create a sense of recovery amongst those that don't understand long-trend economics. With the real estate market still trending downwards, and with people still losing their homes, and with housing values still decreasing all over the country, and with the construction industry in ruins, there really is no cause for optimism anywhere. Housing and house values, drive a huge chunk of the economy. When people lose value in their homes, the tend to hold back spending, and spending is the name of the game in any economy.
        adornoe
      • jessiethe3rd: It's not possible to be more ignorant (continued)

        <i> and the great work Alan Greenspan did leading up to the crisis.</i>

        Greenspan represented government intervention into the markets, and dictating the value of money and lending rates is government intervention. Greenspan's job should never have existed. He was part of the problem.

        <i>In a pure capitalistic world there are only to things you can pretty much count on... Boom & Bust.</i>

        Booms are expected with great economic ideas, and Busts are the corrections in the system, but the general trend, in a capitalistic economy, is always up, with everybody benefiting, including government coffers.

        <i>What the banking industry, wallstreet, and the puppet government are embarking on is destablization of the establishment...</i>

        The only devil in the bunch there is the government. Anytime government gets involved in determining winners and losers, everybody loses, including government, and the proof of that is our current economic messes, in the federal and state levels.

        <i>spreading of capitalism and "democracy" to push forward an agenda.</i>

        Has any other system, other than capitalism, ever been able to produce as much wealth as capitalism? Socialism has always failed, no matter where and when it was tried, and no matter what "leaders" tried to implement them. If you think any other economic system can outdo free-market capitalism, why don't you explain how and where it has been done before? With free-market capitalism, the entire population of a country benefits, even if there will always be those who are "relatively poor", but, when compared to all other systems, the poor in a free market system are generally better off than those who are considered "middle class" in other countries with other economic systems.

        <i> This is nothing new - the US is weak with budgetary constraints, new "important" terrorism issues, and unemployment... meanwhile more money is being fleeced for the spread of the cause.</i>

        Weak with budgetary constraints? That makes absolutely no sense!

        Budgetary constraints is a necessity for any entity, including individuals, families, businesses, and governments. Not having a constraint is the cause of many bankruptcies. The U.S., in actuality and in reality, woud've had to go into bankruptcy many years ago, if it had been obligated to run its business the way corporations are required to. The fact is that, there is no way that the U.S. can ever hope to pay down the national debt; it's NOT POSSIBLE. We have spent our way into ruins; we're just not facing that reality yet. The worst is still to come. And it won't be because of "free market capitalism". It's going to be because of "the socialism, stupid!".
        adornoe
      • SlithyTove: You really need to go back to school to learn some

        basic economics..<br><br><i>Who said anything about giving government a pass?</i><br><br>When you don't mention the real culprits who created the messes in the mortgage and financial industries, then you are giving the government a pass. It's far too popular in liberal circles, to blame the evil and greedy people on Wall-Street. It's a game of passing the blame, hoping that the people will not notice who the real culprits are/were. <br><br><i> The creation of Fannie and Freddie was one, sure, though that institution was able to run for a very long time without incident.</i><br><br>Wrong analysis!<br><br>The Soviet Union was able to "run" with communism for over 70 years, but that doesn't mean that there weren't problems;the problems continued building up for over 70 years until it became apparent that the social experiment was not getting the job done, and they finally collapsed. It's the same with Fannie and Freddie, where it took a long time for the problems to build up to the extent where, it just wasn't possible to continue with their schemes anymore and the economy paid a very heavy price. It's the same kind of thing that happened with the dot.com bust of 2000, where for over a decade, everybody was hopeful and many people became millionaires from "thin" air ideas, and then, finally, the bubble burst. Fannie and Freddie were bubbles building up, and the housing bubble burst and took down the rest of the economy with it. <br><br><i> Some of the more recent government de-regulations allowed banks to get away with far more and really got that ball rolling.</i><br><br>The regulations that caused the real estate bubble was the regulations from government that "forced" the banks and mortgage companies to issue loans to people who were not credit worthy, and, when those sub-prime loans were defaulted on by the people who should not have received the loans in the first place, the house of cards came tumbling down, and we ended up with the economic collapse. Again, look it up; it was government intervention which got us into the big mess in the economy. It wasn't deregulation which produced the mess; it was government regulation that forced the sub-prime lending fiasco, which in turn created the economic collapse. Repercussions. Learn the meaning of the word. <br><br><i>There was also plenty of pressure on those institutions from the side of the government who thought everyone should own a house no matter what.</i><br><br>Well, duh! That's what I said in my previous post. And again, it was government that didn't just use pressure; they actually legislated that those lending institutions would make those loans, or there would be consequences. <br><br><i>But if government handed them the rope it was still the bankers that strangled themselves with it.</i><br><br>You're still not thinking.<br><br>Look, if the government had not "forced" those loans to be made, there would not have been any rope to begin with. If you as a government legislative body, take a gun to my head, and tell me to go rob a bank or else I could find myself panhandling in order to eat, then I am going to rob the bank, because, I was being force into it by the government, which is supposed to be the supreme law makers of the land. If I wasn't legally forced to rob the bank, I would never have even thought about robbing the bank. The banks were legally obligated to make those loans, and thus, with Fannie and Freddie also asking for as many loans as possible, with them being the purchasers of last resort for the bad loans, you had the makings of a scheme in which there were many temptations to do crooked things. And, the crookedness was more pronounced within Fannie and Freddie, where many people in high places also became very wealthy with the bad loans. <br><br><i>Quants coming up with all kinds of bizzare ideas that were so confusing and impossible to track that even the banks themselves had no idea what was going on half the time. </i><br><br>People in government knew, and even Bush tried to reign in the "malpractice" in the financial and mortgage industry, but he was blocked every time he wanted to pass "regulations" to bring those practices under control. And, if Bush knew, the people at Fannie and Freddie also, knew, and the people who blocked Bush also knew (Pelosi and Barney Frank being the biggest culprits in what happened). There are no excuses, and there was nothing so complicated that couldn't be tracked and understood. People knew what was happening, and many just turned their heads because, it was more important to get the loans for those unfortunate who would otherwise not get their loans. Repercussions. Learn the meaning of that word.
        adornoe