HMD Global’s manufacturing partner FIH Mobile posted their unaudited financial report for the first half of 2018 (Q1 + Q2). FIH Mobile, a part of Foxconn, reported
6.5 billion dollars in revenue for the period of first half of 2018, which represents a growth of approximately 50% compared to 4.3 billion dollars from the first six months of 2017. FIH also reported an increase in loss from 199 million dollars from H1 2017 to 348 million dollars in H1 2018.
Regarding Nokia phones, FIH stated that HMD Global is now one of the group’s five biggest customers. Nokia smartphones are manufactured in China and India, while featurephones are being made in India and Vietnam. The Business of manufacturing of Nokia phones is subject to pressure, because low margins are needed to reach a favorable volume of devices to drive “economies of scale”, that allow cheaper manufacturing.
Because Nokia phones require better hardware and specifications than similarly priced competitors, it “resulted in Cost of Goods Sold of smart phones being above selling prices”, says FIH. In other words, shipments of Nokia phones are still too small to have a competitive mass production process, where FIH can get parts at a discounted price because of quantity ordered.
For FIH, partnership with HMD is strategic, and that was clear when the company invested 60 million dollars earlier this year. FIH is aware that time is needed to make strategic partnership profitable. Loss on manufacturing on Nokia phones can be seen in the “Europe” segment of FIH’s Business, because HMD is an European company.
In the first half of 2018, according to Counterpoint Research, HMD Global shipped 8.5 million smartphones. With the recent release of Nokia 6.1 Plus and 5.1 Plus in one of HMD’s key markets – India – the company announced doubling in manufacturing and revenue for that market. Better financial results on a yearly level can be expected, because of a better portfolio and availability compared to 2017, but it will be interesting to see if this year’s shipment of Nokia smartphone will get to a threshold were the manufacturing is profitable for FIH Mobile.
You can read FIH’s full H1 2018 financial report (with more details about the Nokia phones manufacturing business) here (PDF).