After reporting results that exceeded expectations, Apple Inc. supplier Foxconn issued a cautious outlook for the current quarter, citing a slowing in smartphone demand following a boom fueled by the pandemic.
The comments from the Taiwanese company, the largest contract electronics manufacturer in the world, are consistent with those from other Asian tech companies that have forewarned of a decline in sales of smartphones, TVs, and other gadgets as rising inflation and growing recessionary fears restrain consumer spending.
The largest PC manufacturer in the world saw sales of the devices slow after being boosted by the pandemic, and it was also negatively impacted by COVID-19 lockdowns at home. As a result, the company reported its lowest revenue growth in nine quarters.
Since its loyal and relatively affluent customer base continues to favour iPhones, Foxconn, which is best known for producing iPhones, has largely escaped damage. On Wednesday, Foxconn predicted that the demand for mid- to high-end smartphones will remain relatively stable throughout the rest of the year despite rising inflation.
However, analysts have cautioned Apple to prepare for weaker demand in China, where the economy is still suffering from the effects of strict COVID-19 lockdowns.
Second Quarter Foxconn Reported Significant Growth
In the second quarter, Foxconn reported “significant growth” in its revenue from smart consumer electronics, including smartphones, which are its main source of revenue. However, it anticipated no change in that company’s revenue growth for the September quarter.
The company’s Chairman Liu Young-way said during a post-earnings call that the numbers show the company’s “resilience” in the face of supply chain issues as net profit and revenue both increased 12% for the April-June quarter.
Like other major producers, Foxconn, formerly known as Hon Hai Precision Industry Co Ltd, has experienced a severe chip shortage that has hampered production.
“Both our clients and we are major international technology companies with respectable supply chain management skills. We are able to lessen the effects of any material shortages thanks to this advantage, Liu said.
According to Foxconn, the third quarter will see strong sales of networking and cloud products. It reiterated its position from last month that total revenue for this year will increase rather than follow previous guidance of remaining flat.
It did not offer a financial outlook.
In recent years, Foxconn has diversified into industries like semiconductors and electric vehicles (EVs), announcing agreements with American startup Fisker Inc. and Indian conglomerate Vedanta Ltd.
Together with struggling American EV manufacturer Lordstown Motors Corp., it is also creating new vehicles.
In contrast to a 0.7% decline in the larger market (.TWII), Foxconn shares closed 0.9% higher prior to the earnings announcement. So far this year, they have increased 5.8%, giving the business a market value of $50.3 billion.