NOK, AAPL, TW:2317

Shares of Foxconn International Holdings, a small Foxconn subsidiary that assembles SmartPhones mainly for Nokia Corp. NYSE:NOK, rose more than 30% in Hong Kong Monday, after some brokerage reports said that the unit will start making Apple Inc.’s NASDAQ:AAPL iPhones.

Taiwan’s Hon Hai Precision Industry Co. TW:2317, the company commonly known as Foxconn that assembles many Apple products such as iPhones and iPads owns a 70% stake in Foxconn International, which only accounted for a fraction of the Foxconn group’s revenue last year.

At mid-day, Foxconn International shares were + 34% at HK$3.67 on heavy volume, but off their intra-day high of HK$3.69. Buying was due to speculation that the company, like its parent Hon Hai, will become part of Apple’s supply chain.


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Foxconn International’s production facilities are located in the same complexes as Hon Hai’s across China, has not played a major role within the Foxconn group, because the unit has not been involved in the production of Apple products.

Heavy buying came after Citigroup NYSE:C, said in a report Friday, that Foxconn International last month started manufacturing metal casings for the iPhone 5, and Hon Hai may shift some of its iPhone assembly work to the subsidiary later this year.

The brokerage raised its rating on Foxconn International to Buy from Neutral and listed the target price to HK$5.80 from HK$4.00, saying that the iPhone business will help raise the company’s factory utilization rate to 80%, compared to 30-50% in the past few years.

Another broker said in a report Friday that Hon Hai is likely to shift some of its iPhone component production to Foxconn International, even though the subsidiary may not start assembling iPhones. “Foxconn International has some idle capacity and such order transfer makes good sense. But assembling the iPhone needs a lot of fine-tuning of Foxconn International’s facilities and quality control and that is not easy to be done,” the broker said.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.