Foxconn announces $218 million loss for 2010

Foxconn, the manufacturer of Apple's iPad 2, has announced a net loss of $218 million for 2010, citing 'tough challenges' including shifting market dynamics and increased competition from rivals.

In a statement, the Taiwan-based company described the 659 per cent tumble in profits over the previous 12 months as "an extremely difficult year", adding:

"We saw major changes in the handset ecosystem triggered by entry of new players, introduction of new software and applications, as well as emergence of new business models.

"Despite our continual efforts to further diversify customer base and sources of revenue, the operation results for the Company concluded less than satisfactorily. Revenue for the year 2010 was US$6,626 million, which represents a change of US$588 million, or 8.2 per cent less than the prior year revenue of US$7,214 million."

Drawing a discreet veil over the salary increases the company was forced to introduce for its workforce in mainland China, in the wake of a much-publicised spate of suicides at Foxconn's Shenzhen and Kunshun facilities, the statement goes on to refer to a "higher manufacturing overhead".

This is blamed on the "lower utilisation of facilities and relocation, changes in product mix, impairment losses, continued long-term investment in research and development activities as well as higher consolidated income tax".

Some of the company's increased costs, it says, result from streamlining of its operations in the People's Republic. Continued expansion is planned in Langfang, Beijing and Tianjin, while the company is negotiating with rival manufacturer the Hon Hai Group to sell some of its less profitable assets. Despite difficult market conditions the company says it has continued to invest heavily in R&D.

"Looking ahead to 2011," continues the statement, "our alarming setback in 2010 has created a sense of urgency in the organisation. We need to change as the market is changing and our customers are changing. We need to take decisive actions to conclude our capacity re-location, optimise our cost structure and return to profitability."