TAIPEI – Foxconn Electronics reported first-quarter net profits rose 2.9% year-over-year to NT$16.07 billion (US$528.6 million), despite sales growth of more than 20%.

Revenues were up 22.9% to NT$301.8 billion, the company said.

The company cited higher labor costs in China, rising raw material prices and employee bonuses eroded part of the net earnings. According to company spokesman Edmund Ding, employee bonuses will make up some 8% of the EMS firm’s net profits for 2007.

Foxconn Electronics is the trade name of Hon Hai Precision Industry Co.

For the quarter, gross margin was 4.82%, down 67 basis points from last year. Operating margin dropped 132 basis points to 2.4%.

Analysts said the company was likely hurt by declining margins at big cellphone customers like Nokia.

Hon Hai subsidiary Foxconn Precision Components reported first-quarter net earnings fell 22.6% to NT$1.25 billion. Gross margins upticked 38 basis points to 4.58%, and operating margins rose 66 basis points to 3.83%.