Hong Kong: Shares of Foxconn, the world’s largest contract cellphone maker, fell to an eight-month low on Wednesday after it warned its first-half losses may widen due to weaker pricing and higher depreciation expenses.
Foxconn shares fell as much as 9.8% in early trade to its weakest level since October 5 last year. By 7:51am, it had pared those losses to trade down about 7% at HK$5.10 ($0.66).
“This is a total surprise,” said Lu Chialin, an analyst at Macquarie Securities in Taipei. “Most cellphone brands are already experiencing a rebound in business, so it’s really strange that Foxconn is doing worse than 2009, which was already such a bad year.”
Shares of Foxconn are down about 44% so far this year, worse than the 8% decline on the benchmark Hang Seng index.
Foxconn, a key supplier to brands such as Nokia and Sony Ericsson has been struggling with a wave of labour unrest in China, where increasingly assertive migrant workers are calling for better conditions and higher pay.
Together with its parent Hon Hai, it is moving much of its production away from China’s increasingly expensive coastal regions to cut its operating expenses, a process it started in 2008.
Workers at Foxconn’s giant Longhua factory north of Shenzhen said the firm had notified them that it wanted to shift 300,000 of around 450,000 workers from several Shenzhen plants to a massive new factory planned in central Henan province.
“The first workers may move in October,” said a production line worker surnamed Wang, who declined to give his full name. “Workers who originally come from Henan province and other northern provinces seem more interested in moving, but many others like myself want to stay here,” Wang added.
Hon Hai has about 800,000 employees in China, and is one of the country’s largest private employers.
A Hon Hai spokesman said the company would release a statement after the Taipei stock market close on its growth strategy in China, but declined to comment on any specific investments.
Any major investment would also require approval from the company’s board of directors and Taiwanese authorities, he added.
Foxconn will build a new plant in central Henan province that will eventually employ 300,000 people, the official Xinhua news agency reported on Tuesday, after authorities in a Henan city posted a job recruitment ad on a government website.
Hon Hai had already said it intends to build a production facility that will cost at least $1 billion in the southwestern city of Chengdu, part of its overall strategy of moving to diversifying its production base.
Hon Hai also has large production facilities in southwest Chongqing, where its client and the world’s largest PC firm Hewlett-Packard <HPQ.N> runs a factory.
“Foxconn has been saying it wants to move inland for a while now, and the recent wage increases are all going to speed up the move,” Lu at Macquarie said.