Foxconn is starting to feel the pain of slowing smartphone sales


  • Q2 profit of T$33.29 billion vs. T$31.02 billion market view
  • Second quarter revenue increased 12% to T$1.5,000,000
  • Stable growth in consumer electronics in the third quarter
  • Sees Strong Growth in Cloud and Networking Products in Q3
  • Says he has a plan B if authorities don’t approve China Tsinghua investment

TAIPEI, Aug 10 (Reuters) – Apple iPhone maker (AAPL.O) Foxconn (2317.TW) gave a cautious outlook for the current quarter after reporting better-than-expected results, citing the slowdown of smartphone demand after a pandemic-fueled boom.

The comments from the Taiwanese company, the world’s largest contract electronics maker, echo those of other Asian tech firms which have warned of declining sales of smartphones, TVs and gadgets as the Soaring inflation and growing concerns of a recession are weighing on consumer spending.

Foxconn has been largely immune to these demand issues as long as iPhones have endured with a loyal and relatively affluent customer base, and it said on Wednesday that rising inflation will only impact limited on demand for mid to high-end smartphones. in the rest of the year.

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Still, Foxconn forecast steady revenue growth from its consumer electronics business, including smartphones, for the quarter ending September, reporting that demand for some devices was slowing after “significant growth” in the second quarter, when the company accounted for half of its overall turnover.

“Overall, we are a little more cautious for the third quarter, but compared to the same period last year, we could still see growth,” company chairman Liu Young-way said. during a post-benefit conference call.

“We will be watching geopolitics, inflation and pandemic developments closely.”

Like other global manufacturers, Foxconn, officially called Hon Hai Precision Industry Co Ltd, faced a severe chip shortage that hurt production as pandemic bottlenecks persisted and war in Ukraine has again strained the logistics channels.

On Wednesday, the company said the second half of the year would be better than the first if there were no major geopolitical changes.

RESILIENCE

China’s Lenovo Group (0992.HK), the world’s largest PC maker whose results are a good indicator of demand for consumer electronics, posted its weakest revenue growth in nine quarters on Wednesday, as sales of gadgets having declined after being dragged down by the pandemic, and it has also been affected by the COVID-19 lockdowns at home. Read more

Foxconn’s net profit and revenue for the April-June quarter rose 12%, and Liu said the numbers showed its “resilience” in the face of supply chain issues.

A motorcyclist rides past the logo of Foxconn, the trading name of Hon Hai Precision Industry, in Taipei, Taiwan March 30, 2018. REUTERS/Tyrone Siu

“Our customers, and we, are all large global technology companies and have relatively strong supply chain management capabilities. This advantage allows us to minimize the impact of any material shortages,” said Mr. Liu.

Foxconn said it expects cloud and networking product revenue to be strong in the third quarter. He reaffirmed his position from last month that overall revenue this year will rise, rather than previous forecasts of remaining flat. Read more

He did not provide any quantified outlook.

Looking to the future, Foxconn has diversified into areas such as electric vehicles and semiconductors.

UNIGROUP INVESTMENT

Speaking about Foxconn’s $800 million investment in struggling Chinese chipmaker Tsinghua Unigroup last month through a subsidiary, Liu said Foxconn would abide by the law and that if authorities did not approve the investment, he had a backup plan. Read more

He did not specify the plan.

Taiwan, which has become increasingly cautious about China’s ambition to boost its chip industry, wants to persuade Foxconn to call off the investment, the Financial Times reported on Wednesday. Read more

The democratically-ruled island, which China claims as its territory, bars companies from building their most advanced foundries in China and has proposed new laws to stop what it says is China stealing its chip technology.

Taiwan has faced days of Chinese military exercises since last week when US House Speaker Nancy Pelosi visited the island, despite warnings from Beijing against a trip.

Foxconn shares closed 0.9% higher ahead of the earnings release, versus a 0.7% decline in the broader market (.TWII). They are up 5.8% so far this year, giving the company a market value of $50.3 billion.

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Reporting by Yimou Lee and Sarah Wu; Written by Sayantani Ghosh; Editing by Muralikumar Anantharaman

Our standards: The Thomson Reuters Trust Principles.

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