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Foxconn’s profits see largest drop since recession as iPhone X production stalls

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In a picture taken on May 26, 2010 Chinese workers assemble electronic components at the Taiwanese technology giant Foxconn's factory in Shenzhen, in the southern Guangzhou province. Foxconn on June 2 confirmed the death of another employee but denied he died of exhaustion following a spate of suicides at its Chinese plants. CHINA OUT AFP PHOTO (Photo credit should read AFP/AFP/Getty Images) AFP

Foxconn’s profits fell to $700 million last quarter, a 39 percent year-over-year decline from the $1.09 billion it pulled in during last year’s third quarter. It’s the Taiwanese assembler’s largest drop since the global recession, and it’s all due to the initial iPhone X production problems, as Foxconn relies on Apple for more than half of its business.

As first reported by Bloomberg, Foxconn, the sole assembler of iPhone X devices, was unable to assemble as many iPhone X phones as it needed to stay profitable due to a lack of parts. Not enough suppliers make OLED displays, and many struggled with the technical process of constructing the Face ID unit. Earlier last month, defective units from faulty Face ID parts sparked iPhone X production reports that Apple would only ship 20 million units, or half of what was planned.

Making iPhone X devices caused Foxconn’s operating expenses to rise over 16 percent in Q3. And the easier-to-assemble iPhone 8 and iPhone 8 Plus models haven’t sold as well. Additionally, on the Asia front, Apple faces competition from companies like Huawei and Vivo, which produce cheaper, iPhone-like alternatives.

But there is hope yet for Foxconn, as people are still clamoring to buy the iPhone X. Currently, the iPhone X is backordered up to four weeks, according to 9to5Mac. Once those orders are filled, Foxconn may be able to recover from its low profit margins.