In the context of slow progress in expanding new customers, there is also a risk of Foxconn's existing orders being snatched away, and this trend has begun to emerge this season

The huge changes in the mobile phone industry have directly affected the business of Foxconn Precision Industry (hereinafter referred to as "Foxconn"). If no changes are made, it may miss more opportunities.

In the context of slow progress in expanding new customers, there is also a risk of Foxconn's existing orders being snatched away, and this trend has begun to emerge this quarter. "An analyst in Taiwan, who declined to be named, told reporters that on the one hand, orders from major customers are being diverted, and on the other hand, expanding new customers is weak, and Foxconn is being squeezed by peers.

Apple's' cheating 'hits Foxconn hard

Since Apple became the dominant player in the market, Foxconn has benefited greatly from it, but this has also created a situation that has been a headache for Terry Gou for several years: Foxconn can profit from Apple's success on the one hand, but on the other hand, it has to bear the losses caused by Apple's own performance decline or Apple's order transfer.

Foxconn's recently released Q1 2013 financial report shows that its consolidated revenue for the quarter was NT $809 billion, a decline of nearly 20% compared to the same period in 2012. The gross profit margin was 5.68%, a decrease of nearly 1 percentage point compared to the same period in 2012. Worse still, its Taiwanese competitor in tablet assembly, Heshuo, saw a 31% increase in revenue to NT $195.27 billion.

Since October last year, the launch of the iPad mini has driven strong revenue growth for Heshuo, and since the fourth quarter of last year, a large number of Heshuo tablets have been shipped. According to Taiwanese analysts who previously told reporters, the order volume obtained by Pegasus in Apple's new round of products may exceed everyone's expectations.

A KGI Securities analyst who has been tracking Apple for a long time said that you can imagine that Apple doesn't like a situation where there is only one supplier. For Pegasus, the most important thing is to prove that they can be competent in manufacturing iPhones or iPads like Foxconn.

Difficulty in expanding new customers

Like other companies in Apple's supply chain, Foxconn clearly knows that expanding new customers is a way to reduce risk, but it doesn't seem to be going smoothly at the moment. In the 2012 financial report of Foxconn International (02038. HK), a listed company under Foxconn, it was clearly stated that in the future, it hopes to expand its customer base by investing in research and development and focusing on new customers. Previously, Foxconn International also set a record for its largest loss in the seven years since its listing.

However, a person close to Foxconn told reporters that according to Foxconn's large-scale production method, small mobile phone orders not only result in high production costs, but also lower customer response times than market response times. This is also the core issue that Foxconn needs to consider when expanding new customers.

Terry Gou visited domestic mobile phone manufacturer Xiaomi in March this year. Xiaomi President Lin Bin stated on Weibo on March 21 that Terry Gou visited Xiaomi and held talks with Chairman Lei Jun. There is speculation from the outside that Foxconn may have obtained an order for Xiaomi phones, but Foxconn has declined to comment on this.

Xiaomi's market share is not high, and it cannot bring considerable revenue to Foxconn, while other domestic mobile phones that are manufactured by Foxconn are mostly low-end models, and we have not heard of any high-end flagship orders, "said the person mentioned above.

The orders are not easy to obtain, and Foxconn's competitors are also competing for potential customers. "The person close to Foxconn also cited the example of BYD (002594, stock bar) (002594. SZ).

In BYD's recently released Q1 financial report, the net profit attributable to shareholders of the listed company was 112 million yuan, an increase of 315.63% year-on-year. The company stated that the group has successfully developed new projects for smartphones and new products and businesses such as tablets from global mobile phone leaders, which has driven significant growth in revenue and profits from the group's mobile phone components and assembly business. A person close to BYD told reporters that the businesses of Samsung and Huawei are important engines for BYD's electronic growth in this round.

Last year, Huawei's mobile phone sales saw a significant increase, which should have been Foxconn's most sought after OEM customer.

Expanding Samsung's customer base seems to be an unrealistic consideration. In the past, on different occasions, Terry Gou has been generous in expressing his views on Samsung, saying, "As long as it does something, I will definitely unite with everyone to fight against it. I will definitely give it a blow." At a dinner party, Terry Gou raised his arms and called on well-known IT and home appliance entrepreneurs in Taiwan to join his "wolf fight" campaign, and this wolf is Samsung.