Apple supplier Foxconn cautious on outlook as smartphone sales slow

The statements from the world's largest contract electronics maker, echo those from other Asian tech firms that have warned of a drop in sales of smartphones

Reuters
Published : 10 August 2022, 10:48 AM
Updated : 10 August 2022, 10:48 AM

Apple Incsupplier Foxconn gave a cautious outlook for the current quarter after posting results that exceeded expectations, citing slowing smartphone demand after a pandemic-fuelled boom.

The comments from the Taiwanese company, the world's largest contract electronics maker, echo those from other Asian tech firms that have warned of a drop in sales of smartphones, TVs and gadgets as surging inflation and deepening concerns of a recession crimp consumer spending.

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.

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 it forecast flat revenue growth for that business in the quarter ending in September.

Both net profit and revenue for the April-June quarter rose 12%, 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.

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 a previous guidance of remaining 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 US startup Fisker Inc and Indian conglomerate Vedanta Ltd.

It is also developing new vehicles with struggling US 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.

Toufique Imrose Khalidi
Editor-in-Chief and Publisher