Hon Hai's Q4 Guidance Implies Robust iPhone Demand but Longer-Term iPhone EMS Risk Lingers

Apple, which has established itself as a consumer electronic behemoth over the past decade, has propelled Hon Hai to become the world’s largest contract manufacturer. Despite its entrenched position in Apple, which accounts for 50% of the group’s revenue, Hon Hai is faced with increasing competition in the traditional assembly business at a time when smartphone demand has matured. As a result, its returns on invested capital, or ROIC, has fallen sharply to 11.7% in 2018 from 17.3% in 2009.