* Q1 net profit T$19.54 bln vs T$18.18 bln analyst view
* Profit driven by strong Q1 iPhone sales
* IPhone orders likely to surge to 90 mln units-analyst
(Adds analyst comments, context)
By Michael Gold
TAIPEI, May 14 Hon Hai Precision Industry Co Ltd
, the world's largest contract maker of electronic
goods, booked its biggest-ever first-quarter profit thanks to
exceptional demand from main client Apple Inc.
The Taiwanese manufacturer earns as much as 60 percent of
revenue primarily assembling Apple products such as its iPhone
5S, analysts estimate, and in recent months has diversified into
software and services as industry watchers point to a slowdown
in the smartphone market.
But Apple defied such forecasts in March when iPhone
shipments beat market estimates by 15 percent, pushing
first-quarter revenue to a record high in a post-holiday period
when consumer goods sales typically fall.
That demand helped Hon Hai book a 19.5 percent rise in
first-quarter net profit to T$19.54 billion ($647.6 million),
versus the T$18.18 billion mean estimate of 12 analysts polled
by Thomson Reuters.
Shares of Hon Hai ended 0.3 percent higher ahead of the
result, compared with a 0.7 percent gain in the broader TAIEX
index. The stock has risen 9.7 percent since the start
of the year versus the benchmark's 3.1 percent gain.
Hon Hai's reliance on Apple has been cited as both benefit
and hindrance by commentators. Smartphones such as the iPhone
command high prices but have already become widespread in
Researcher IDC projects worldwide smartphone sales to grow
19 percent this year from 39 percent last year, slowing to an
average of 11.5 percent over 2014 to 2018. The quickest growth
rates are in emerging markets, where low-end models dominate.
"Slowing sales could be a cap on Hon Hai's revenue in the
future," said Yuanta Securities analyst Vincent Chen. "That's
why you've had [company chairman] Terry Gou say it needs to look
for other sources of growth."
In a departure from manufacturing, Hon Hai expects to begin
operating a fourth-generation (4G) mobile telecommunications
network this year and has hired thousands of software engineers
to work on cloud computing initiatives.
But reliance on Apple is still likely to be a boon, with the
release of a new-model iPhone later this year. Citi analyst Wei
Chen expects Apple to order 90 million handsets from Hon Hai in
2014, nearly double the orders for the iPhone 5S.
The next iPhone is likely to have a larger screen than its
predecessors. This could unlock a substantial consumer base
put-off by the current models' small screens compared with rival
offerings from Samsung Electronics Co Ltd, Chen
wrote in a recent report.
"We believe the iPhone 6 could be the biggest product cycle
that Hon Hai has yet seen," Chen wrote.
($1 = 30.1710 Taiwan Dollars)
(Editing by William Hardy and David Holmes)