Foxconn facing net loss in 2012 from weak demand

Taiwanese contract maker has said that losses from the second half of the year, while smaller than the first six months, is likely to result in the company incurring an overall deficit.
Written by Liau Yun Qing, Contributor

Foxconn International expects to post a net loss for its financial year 2012 due to lower demand from some of its major customers.

In a statement Wednesday (PDF), the contract maker said it is expecting more losses for the second half of financial year 2012, following a net deficit of US$226 million in the six months ended June 30, 2012. This contrasts with a net profit of US$72.8 million for the year ended December 31, 2011.

Foxconn was hit by labor-related scandals in 2012.

While Foxconn did not specify the net loss for the year, it said the loss made in the second half of 2012 was smaller than the first half of 2012.

The overall loss was due to various reasons including lower demand from some of the group's customers, which led to lower sales of the group's products as well as impaired assets. The decline in its gross profit margins was the result of "unfavorable pricing changes and increase in cost."

Foxconn is owned by Taiwan-based Hon Hai Precision Industry, which is the world's largest contract manufacturer of electronics. Foxconn manufactures phones for Apple, Amazon, Nokia, Motorola, and HTC.

Last year was a busy one for the Taiwanese contract maker as it continued to be hit by labor-related scandals. In January 2012, Foxconn reached a deal with employees who threatened mass suicide over staffing assignments and transfer policies.

In March, the US Fair Labor Association (FLA) said it found "significant issues" at three of Foxconn's Chinese factories where it conducted inspections beginning in February, including excessive overtime, problems with overtime compensation, and several health-and-safety risks.

Following the investigations, Foxconn's major customer Apple said it would share cost with the contract maker to improve working conditions in the factories.

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