Apple supplier Foxconn sees possible revenue hit from supply chain woes

Apple supplier Foxconn forecast an up to 3% fall in revenue for the year in what could be its first annual sales decline in six years, as a shortage of chips squeezes smartphone production and demand cools following a surge during the pandemic.

The Taiwanese company, which had stopped production in China earlier this week to comply with government curbs, said separately that it had restarted some production and operations at its Shenzhen campus after meeting government conditions for staff to live and work in a bubble. read more

The stoppages from Foxconn – the world’s largest contract electronics maker – and other companies including Japan’s Toyota Motor (7203.T) have fuelled concerns over how global supply chains could be impacted as China deals with its biggest spike in COVID-19 infections since early 2020. read more

Chairman Liu Young-way said on a post-earnings call on Wednesday that Foxconn would only have better clarity on supply chain uncertainty in the second half of the year.

He said the record-high revenue in 2021, boosted by booming electronics demand following the pandemic, would lead to “stable” business this year due to a high base last year.

“The pandemic has not eased, inflation is high and global politics are getting tense – these all further complicate supply and demand and lead to great uncertainty to our outlook,” Liu said, calling 2022 a “very challenging year”.

Still, Liu said he was “cautiously positive” about the company’s 2022 sales outlook, citing continuous growth from sectors including 5G smartphones and cloud products.

He had previously warned that he expected the chip shortage to run into the second half of 2022.

Liu said on Wednesday that Foxconn expected limited impact from the war in Ukraine, echoing Taiwan’s government which says any impact on the island’s supply chains would be small because Russia and Ukraine are not the main import sources of raw materials such as nickel and neon.

Apple has paused all product sales in Russia in response to the invasion, which Russia calls a special military operation.

Foxconn, formally called Hon Hai Precision Industry Co Ltd, said it expected revenue for the first quarter as well as the year to range between a 3% fall and a 3% rise. Analysts expected revenue this year to rise 1.2%.

The company forecast smartphone revenue to be flat in 2022.

EV PLAN

Foxconn has in recent months announced plans to become a major player in the global electric vehicle (EV) market. On Wednesday, it said it doesn’t expect revenue from EVs to be significant until 2023. read more

Foxconn, which has EVs deals with a variety of companies including Lordstown Motors Corp (RIDE.O), forecast an annual production of up to 750,000 units by 2025.

In the fourth quarter ended December, Foxconn’s revenue fell 6%, its first decline in five quarters, though still the second-highest for the quarter.

Revenue from its key smart consumer and electronics products business fell between 3% to 15%, in the period. Smartphones account for 60% of this business.

Revenue from its cloud and networking products as well as computing products was flat. Components revenue rose more than 15%.

Foxconn shares closed 0.5% higher ahead of the earnings release, versus a 0.1% gain in the broader market (.TWII). They have fallen 2.4% so far this year.

Net profit fell 3.4% to T$44.4 billion ($1.55 billion) in the October-December period. That compared with the T$43.32 billion average of 10 analyst estimates compiled by Refinitiv.

($1 = 28.5700 Taiwan dollars)

Reporting By Yimou Lee and Ben Blanchard; Editing by Sayantani Ghosh and Muralikumar Anantharaman

This article was originally published by Reuters.