Sell off may be relate to hire freeze in Foxconn Shenzhen
Few day ago when selloff start there news reports of Foxconn factory of Shenzhen stop new hire because weaker demand Apple products. It estimate a very large percent of work in Foxconn Shenzhen is for Apple. Maybe over 75%. So this lead to selling in many stock that provide parts or work to Apple. Include Nam Tai.
Some not familiar China may hear hire freeze do not sound so bad since at least there no layoff. But some no understand that it time of Chinese New Year holiday. During Chinese New Year almost all worker return home family.
There many worker that come from other city, rural areas of China, and other province far to work in factory in big city like Shenzhen. This include young Chinese teenager who only 16 to 19 and leave father, mother and family. There are also many worker who parent and have leave young children back home while they travel far for work. OInly get see children during Chinese New Year each year when go home.
So usual during Chinese New Year when come back to family after long year work, many decide not to go back factory and instead find work close home because miss family or because work at factory to hard or boring. The percent vary by company but not unusual sometime for as much 15%-20% employee no return. Especial at big factory where working condition is bad and managers very mean to workers.
So even if only 10% do not return for work and Foxconn Shenzhen have hire freeze. It mean they reduce total workers by 10% and demand is declining.
There have been articles since then where Foxconn is quoted as saying that more workers returned this year than expected (normally 80% return, this year 90%) so they don't need to hire more. We've just had the biggest holidays of the year (Christmas, Chinese New Year, etc.) and it will be some months before new products are introduced, so a little fluctuation is normal. It's misleading to say that demand is dropping -- it's just normal seasonality. Should Christmas tree salesmen panic because no one is buying Christmas trees right now?
Could be right, I Phone 5 production slowing down for conversion to new I Phone 5S model that is going in production in either March or May. Koo mentioned about new smartphone production starting in this time frame.
Also, well worth remembering that Topeka analyst Brian White has NTE doing $150 mil in 1Q revs - down huge from 4Q, so seasonal weakness is very much reflected. As you might recall, on the conference call, Mr. Koo said that utilization was currently 30% - based on $900 million capacity, that's a $270 million quarter. If he's off by 25%, that's still a $200 million quarter, or a huge beat of the 1 street analyst. Also, he's modeling only $218 million for 2Q. IF ANY NEW PROGRAM LAUNCHES 2Q could be 2x his model. Yeah, $13 with $4.50 cash and real estate worth something (whether $2 or $20)...I don't see what any short is playing for other than $1 down on bad apple news...but to play for $1 versus HUGE upside seems kind of silly.