Apple Inc supplier Foxconn reported on Tuesday a surprise 11 per cent increase in third-quarter profit, boosted by strong demand for smartphones ahead of the year-end holiday shopping season in Western markets.

Net profit for the July-September quarter rose to T$43.1 billion ($1.3 billion), beating market estimates for an 11 per cent drop.

The electronics maker said, however, that it expects revenues for the fourth quarter and the full year would log slight declines, though the fourth quarter would be a bit better than previously expected.

"We have entered the traditional season of hot sales in the second half and our operations are set to gradually improve quarter on quarter," Chairman Young Liu told an earnings briefing.

Apple, which in September launched a new series of iPhones, this month gave a sales forecast for the holiday quarter that missed Wall Street expectations, hurt by weak demand for iPads and wearables.

Foxconn's smart consumer electronics division, which includes smartphones, makes up about half of its total revenue.

The earnings announcement comes amid much investor focus on reports that the company has become the subject of a tax probe in China.

The tax investigation was first reported by Chinese tabloid the Global Times, but in its English version of the story it suggested what China was actually unhappy about was that Foxconn founder Terry Gou is running for president as an independent, a decision he announced in August.

Shares of Foxconn closed up 2.4 per cent ahead of the earnings announcement, beating a 0.5 per cent gain for the benchmark index .

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