Apple supplier Foxconn sees challenges ahead in China lockdowns and inflation
Slightly More Total Revenue Half File Make And Consumer Of Than Foxconn's Up Picture Electronics Smartphones
Apple supplier Foxconn has warned that current-quarter revenue for its electronics business, including smartphones, could slip as growth slowed amid rising inflation, cooling demand, and escalating supply-chain issues partly due to lockdowns in China.
Like other global manufacturers, the Taiwanese firm — the world's largest contract electronics maker — has grappled with a severe shortage of chips, which has hurt smartphone production, including for its major client Apple.
While the company reiterated that Covid-19 controls in China only had a limited impact on its production as it kept workers on-site in a "closed loop" system, demand for its products in the country has suffered as people remain shut in.
The slowdown has recently been exacerbated with a downturn in major markets due to high inflation and the war in Ukraine.
The predictions reinforce the urgency for Foxconn to reduce its reliance on smartphones and consumer electronics, which make up slightly more than half of its total revenue, and diversify into areas such as electric vehicle manufacturing, which it sees as a $34bn (€32.5bn) business by 2025.
"There are many uncertainties in the market at the moment," Foxconn chairman Liu Young-way told a post-earnings call, citing the pandemic, geopolitical risks, and inflation among them for the year.
The slight decline estimated in consumer electronics revenue for the second quarter was due to a higher base last year and before new product launches later this year, he said.
Mr Liu said inflation is hitting demand for lower-end consumer electronics, but the impact on the company so far has been limited as most of its products are higher-end.
"We are closely watching when inflation will impact mid- and high-end products," he said.
The company, formally called Hon Hai Precision Industry Co, expects overall revenue to be flat for the current quarter and for the full year.
It did not provide a numerical outlook, but projected strong growth for its other businesses such as components, computing products, and cloud and networking products.
In the first quarter ended in March, Foxconn's revenue rose 4%. Net profit grew 5% to $985.5m and was largely in line with average analyst estimates.
In autos, Foxconn said it will develop new vehicles with struggling US electric vehicle maker Lordstown Motors. Earlier this week, the Taiwan company said it completed a deal to buy a Lordstown factory in Ohio for $230m.
The two companies will also form a joint venture to make vehicles, with Lordstown owning a 45% stake and Foxconn owning the rest.