Foxconn, an Apple supplier, warned that revenue for its electronics sector, which includes smartphones, could fall in the current quarter as growth slowed owing to rising inflation, cooling demand, and escalating supply chain challenges, partly due to Chinese lockdowns.

Like other worldwide manufacturers, the Taiwanese firm, the world’s largest contract electronics manufacturer, has been dealing with a severe chip shortage, which has hampered smartphone production, especially for its key client Apple.

While the corporation reiterated that COVID-19 regulations in China had a limited influence on production because workers were kept on-site in a “closed loop” method, demand for its products in the nation has declined as people remain trapped.

The slowdown has recently been compounded by a drop in major markets as a result of high inflation and the Ukraine conflict.

The forecasts highlight the need for Foxconn to diversify its revenue streams away from smartphones and consumer electronics, which account for slightly more than half of its total revenue, and into areas such as electric vehicle (EV) manufacturing, which it estimates will be worth $34 billion 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,” Liu said.

Consumer electronics sales is expected to fall somewhat in the second quarter due to a higher base last year and before new product debuts later this year, he said.

Inflation is affecting demand for lower-end consumer electronics, according to Liu, but the impact on the company has been minimal so far because the majority of its items are higher-end.

“We are closely watching when inflation will impact mid and high end products,” he said.

Overall revenue for the current quarter and the full year is expected to be flat, according to Hon Hai Precision Industry Co Ltd. It did not provide a numerical forecast, but said its other businesses, like as components, computing products, and cloud and networking solutions, will develop rapidly.

Foxconn’s revenue increased by 4% in the first quarter, which concluded in March. According to Refinitiv, net profit increased 5 per cent to T$29.45 billion ($985.48 million), which was broadly in line with an average analyst projection of T$29.76 billion.

Foxconn announced that it will collaborate with Lordstown Motors Corp., a failing electric vehicle manufacturer in the United States, to develop new vehicles. The Taiwanese firm said on Wednesday that it had completed a $230 million deal to purchase a facility in Ohio from Lordstown.

The two companies will also form a joint venture to manufacture automobiles, with Lordstown holding 45 per cent and Foxconn the remainder. continue reading

Assembling electric vehicles has poor gross profit margins, according to Liu, similar to its smartphone manufacturing business. That is why, according to him, Foxconn intends to produce more profitable EV components like auto processors and batteries.

“Only in this way can we achieve double-digit gross profit margins.”

Foxconn shares fell 1 per cent ahead of the earnings report, compared to a 2.4 per cent loss in the broader market. They’ve lost around 2 per cent so far this year, putting the company’s market value at $48.1 billion.

(Adapted from Latestly.com)