Shares of Taiwan’s Foxconn surged after the company lifted its full-year business outlook amid stellar sales of smartphones and servers.
June sales jumped 31% from a year earlier to a record high for the month, thanks to supply chain management and rising sales of consumer electronics, the company said in a statement late on Monday. Smartphones make up the bulk of its revenue.
Foxconn‘s better-than-expected June sales come at a time when investors are concerned about slowing tech demand during a downturn in major markets due to high inflation and the war in Ukraine.
Foxconn has struggled with a shortage of chips in recent times, partly due to China’s Covid-19 lockdowns, hurting smartphone production for top clients such as Apple.
Micron Tech Warning
Chip stocks across the world tumbled on Friday after memory chip maker Micron Technology forecast on Thursday significantly worse-than-expected revenue for the current quarter and said the market had “weakened considerably in a very short period of time.”
Foxconn said it was optimistic about its business in the third quarter, adding it could see “significant growth” compared with a year earlier.
For 2022, Foxconn said the outlook has improved compared with earlier expectations for no growth, without providing details.
The company, formally called Hon Hai Precision Industry Co Ltd, said it has seen double-digit yearly growth in sales from servers and telecommunications products so far this year.
The company has said 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.
Analysts at Daiwa Capital Markets in Taipei said in a report demand for servers from US-based cloud service providers helped propel double-digit growth for the sector. They expected Foxconn‘s operating profit to grow 12-19% this year.
Morgan Stanley analysts said Foxconn‘s upbeat guidance for the third quarter showed that strong demand for cloud servers and iPhone assembly will continue.
The company’s shares rose as much as 3% on Tuesday before closing up 2.5%, outperforming the broader market, which gained 0.9%. Foxconn shares have dropped around 1.4% so far this year, giving the firm a market value of $46.53 billion.
- Reuters with additional editing by Jim Pollard
ALSO on AF: