Apple supplier Foxconn predicts tough year on China's COVID curbs and inflation

Apple supplier Foxconn predicts tough year on China’s COVID curbs and inflation

A shovel and the FoxConn logo are seen ahead of the arrival of US President Donald Trump as he participates in Foxconn Technology Group’s groundbreaking ceremony for its LCD manufacturing campus in Mount Pleasant, Wisconsin, United States, June 28, 2018. REUTERS/Darren Hauck/Files

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  • Q1 net profit of T$29.45 billion vs. T$29.76 billion market view
  • Sees stable revenue in Q2 and 2022
  • sees steady consumer electronics revenue in 2022

TAIPEI, May 12 (Reuters) – Apple supplier Foxconn (2317.TW) has warned that current-quarter revenue for its electronics business, including smartphones, could fall as growth slows in a amid rising inflation and slowing demand in a locked-down China, as well as increasing supply. chain problems.

The Taiwanese company, the world’s largest contract electronics maker, has been grappling with a severe shortage of chips like other global makers, which has hurt smartphone production, including for its biggest customer Apple (AAPL .O). Read more

While the company reiterated that COVID-19 controls in China had only 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 locked up. The slowdown has recently been exacerbated by a pullback in major markets due to high inflation and the war in Ukraine.

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The predictions reinforce the urgency for Foxconn to reduce its dependence on smartphones and consumer electronics, which account for just over half of its total revenue, and to diversify into areas such as the manufacturing of electric vehicles (EV), which it considers a $34 billion business. 2025.

“There are a lot of uncertainties in the market right now,” Foxconn Chairman Liu Young-way said on a post-earnings call, citing the pandemic, geopolitical risks and inflation among them for the year.

“They present many demand and supply challenges.”

The estimated slight decline 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, officially 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 forecast 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 rose 5% to $29.45 billion ($985.48 million) and was broadly in line with an average analyst estimate of $29.76 billion, according to Refinitiv.

In autos, Foxconn said it would develop new vehicles with struggling U.S. electric vehicle maker Lordstown Motors Corp . On Wednesday, the Taiwanese company said it had reached an agreement to buy an Ohio factory in Lordstown for $230 million.

The two companies will also form a joint venture to manufacture vehicles, with Lordstown holding a 45% stake and Foxconn holding the rest. Read more

Foxconn shares closed 1% lower ahead of the earnings release, versus a 2.4% decline in the broader market (.TWII). They’ve fallen about 2% so far this year, giving the company a market value of $48.1 billion.

($1 = 29.8430 Taiwan dollars)

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Reporting by Yimou Lee in Taipei; Additional reporting by Ben Blanchard and Sarah Wu in Taipei; Editing by Sayantani Ghosh and Muralikumar Anantharaman

Our standards: The Thomson Reuters Trust Principles.

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