Apple Supplier Foxconn Predicts Tough Quarter Ahead Amid Low Demand, Rising Inflation in China

Apple supplier Foxconn’s predictions reinforce the urgency for the company to reduce its reliance on smartphones and consumer electronics.

By Reuters | Updated: 12 May 2022 17:09 IST

Apple Supplier Foxconn Predicts Tough Quarter Ahead Amid Low Demand, Rising Inflation in China

Foxxcon said COVID-19 controls in China only had a limited impact

Highlights

The company said it kept workers on-site in a "closed loop" system
Demand for its products in China suffered as people remain shut in
Foxconn said it will develop new vehicles

Apple supplier Foxconn warned that current-quarter revenue for its electronics business including smartphones could slip as growth slowed amid rising inflation and cooling demand in locked-down China, as well as escalating supply chain issues.

The Taiwanese firm, the world's largest contract electronics maker, has grappled with a severe shortage of chips like other global manufacturers, 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.

[Sponsored] Samsung Galaxy S24: The Ultimate Camera Phone With Smarter On-Device AI

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 (EV) manufacturing which it sees as a $34 billion (roughly Rs. 2,63,316 crore) 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.

"They are presenting quite some challenges to demand and supply."

Apple Supplier Foxconn Suspends Production at 2 China Factories

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.

The company, formally called Hon Hai Precision Industry Co Ltd, 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 percent. Net profit grew 5 percent to TWD 29.45 billion (roughly Rs. 7,641 crore) and was largely in line with an average analyst estimate of TWD 29.76 billion (roughly Rs. 7,721 crore), according to Refinitiv.

In autos, Foxconn said it will develop new vehicles with struggling US EV maker Lordstown Motors. On Wednesday, the Taiwan company said it completed a deal to buy a factory in Ohio from Lordstown for $230 million (roughly Rs. 1,781 crore).

The two companies will also form a joint venture to make vehicles, with Lordstown owning a 45 percent stake and Foxconn owning the rest.

Foxconn shares closed 1 percent lower ahead of the earnings release, versus a 2.4 percent drop in the broader market. They have fallen about 2 percent so far this year, giving the company a market value of $48.1 billion (roughly Rs. 3,72,551 crore).

How is Alexa faring in India? We discuss this on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.

Affiliate links may be automatically generated - see our ethics statement for details.

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.