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Foxconn Sees Slow Quarter As Smartphone Demand Declines

The Taiwanese electronics maker forecast flat revenue growth for the quarter ending in September amid concerns over the impact of inflation and a potential recession on gadget demand. 


Taiwan is weighing a fine of up to T$25 million ($835,600) on Foxconn for funding struggling Chinese chip conglomerate Tsinghua Unigroup without government approval.
Foxconn said this week one of its subsidiaries had invested 5.38 billion yuan ($797 million) in struggling Chinese chip conglomerate Tsinghua Unigroup. File photo: Ann Wang, Reuters.

 

Apple Inc supplier Foxconn gave a cautious prediction for the current quarter, pointing to declining smartphone demand after a post-pandemic high. 

The Taiwanese electronics maker, the world’s largest contract electronics maker, forecast flat revenue growth for the quarter ending in September, mirroring predictions of other Asia tech firms who are wary of the effects of worldwide inflation and a potential recession on gadget demand. 

China’s Lenovo Group recorded its smallest revenue growth in nine quarters as the world’s biggest PC maker saw sales of the devices ease after being driven by the pandemic, and it was also hit by COVID-19 lockdowns at home.

Foxconn, best known for assembling iPhones, has been largely shielded so far as the popularity of iPhones has endured among its loyal and relatively affluent customer base, and it said on Wednesday that rising inflation will have a limited impact on demand for mid- to high-end smartphones in the rest of the year.

 

Softer China Demand

But analysts have warned that Apple should brace for softer demand in China, where the economy is still reeling from the effects of strict COVID-19 lockdowns.

Foxconn said smart consumer electronics including smartphones – its main business driver – posted “significant growth” in the second quarter and accounted for half of its overall revenue, but feel this was a temporary post pandemic boom.

Both net profit and revenue for the April-June quarter rose 12%, exceeding expectations, and the company’s Chairman Liu Young-way told a post-earnings call that the numbers show its “resilience” amid supply chain problems.

Like other global manufacturers, Foxconn, formally called Hon Hai Precision Industry Co Ltd, has dealt with a severe shortage of chips that hurt production.

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

 

Revenue Will Grow This Year

Foxconn said it anticipates revenues for cloud and networking products to be strong in the third quarter. It reaffirmed its stance from last month that overall revenue this year will grow, rather than previous guidance that it will remain flat.

It did not provide a numerical outlook.

Foxconn has expanded into areas including electric vehicles (EVs) and semiconductors in recent years, announcing deals with U.S. startup Fisker Inc and Indian conglomerate Vedanta Ltd.

It is also developing new vehicles with struggling U.S. EV maker Lordstown Motors Corp.

Foxconn shares closed 0.9% higher ahead of the earnings release, versus a 0.7% drop in the broader market. They have risen 5.8% so far this year, giving the company a market value of $50.3 billion.

  • Reuters, with additional editing from Alfie Habershon

 

Read more:

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Taiwan Likely to Fine Foxconn for Funding China Chipmaker

Alfie Habershon

Alfie is a Reporter at Asia Financial. He previously lived in Mumbai reporting on India's economy and healthcare for data journalism initiative IndiaSpend, as well as having worked for London based Tortoise Media.

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