Ringhand Attacks Foxconn Profits, Ignores the Big Picture

All of a sudden, Wisconsin Democrats have become a fan of corporate profits.

That seems to be the case as this week showed that Foxconn, the Taiwanese technology company about to begin building a massive factory in Pleasant Prairie, announced that its quarterly profits dropped 39 percent according to its latest earnings report. While the drop in profit was expected due to production delays with Apple’s iPhone X (Foxconn is the sole global producer of the device), it was larger than expected.

Given the political hot potato the Foxconn has become in Wisconsin politics, not surprisingly one Wisconsin Democrat pounced on the news. Janesville state Senator Janis Ringhand (D) had her office issue the following press release attacking Gov. Scott Walker over the $3 billion deal he just signed with the company.

“The earnings report certainly helps explain Governor Walker’s rush to get the Foxconn contract signed before the announcement of bad news. Foxconn knew when their earnings numbers were going public.

The Governor negotiated this deal in secret, put us on the hook for $3 billion, and needs to take responsibility to make sure that Wisconsin taxpayers don’t get the short end of this deal.”

Also in the press release, Ringhand’s office cites a Reuters article on the news.

Perhaps if Senator Ringhand read past the headline, she would have seen these paragraphs further down the article:

While the 10th anniversary version of iPhone has seen parts suppliers struggle with specifications for new features such as facial recognition and edge-to-edge display, red-hot demand for the product, which went on sale this month, is expected to lead to a relatively rapid recovery for Foxconn.

Apple has predicted strong holiday sales and said it is happy with how manufacturing of the iPhone X is progressing, although most analysts think it will likely take until next year or early spring for the tech giant to meet demand.

This viewpoint on the iPhone is something held throughout the industry. When Apple simultaneously unveiled both the iPhone 8 and iPhone X in September, it was the iPhone 8 which was met with lackluster response from current iPhone users. The much more advanced iPhone X was not, meaning that many current iPhone owners were waiting for the X to come out before upgrading.

This analysis has been assumed by Wall Street for sometime as the Holiday shopping season begins.

TrendForce predicts that Apple will take 19.1 percent of the worldwide market share for Q4 2017, the all-important holiday season. That would be up from the Q3 percentage of 11.5 percent, a change driven by the release of the iPhone X, and widespread availability of the iPhone 8, iPhone 8 Plus, and a discounted iPhone SE.

“Samsung is expected to slightly scale back the production of its high-end models in the fourth quarter as the brand is seeing the sales of its smartphones being squeezed by the strong demand for Apple’s latest iPhone devices,” a report seen by MacRumors says. “TrendForce estimates that Samsung’s fourth-quarter total volume will come to 77 million units, a 5% drop from the third quarter.”

Predictions for iPhone X sales are driven by Apple’s own estimates for Q4 2017. The company is forecasting revenue of  $84-$87 billion, which would be a huge beat of the previous record quarterly revenue of $78 billion, set in Q4 2016.

Put it another way, if the iPhone X sells as expected, Foxconn will be fine.

Finally, what Foxconn plans to manufacture in Wisconsin are big-screen, LCD-panel televisions; a completely different market and product than the iPhone and one they believe – given their recent acquisition of television maker Sharp. Inc – could be lucrative given how in 2010, Nielsen stated the average American home now has three television sets in it.

If Ringhand wants to criticize Walker for Foxconn that’s her prerogative, but she might be doing it prematurely.