Apple supplier Foxconn warns of slowing demand and supply

Today saw key Apple supplier Foxconn warn that revenue could slip this quarter due to both slowing demand and growing supply-chain problems.

The company’s chairman said that there were many uncertainties in the market, and that Foxconn would be looking to further diversify to reduce its dependence on smartphone assembly…

Reuters reports.

Foxconn warned that current-quarter revenue for its electronics business including smartphones could slip as growth slowed amid rising inflation, cooling demand and escalating supply chain issues partly due to lockdowns in China.

The Taiwanese firm, the world’s largest contract electronics maker, has grappled with a severe shortage of chips like other global manufacturers, which has hurt smartphone production including for its major Apple client […]

“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 […]

The predictions reinforce the urgency for Foxconn to reduce its reliance on smartphones and consumer electronics, which make up slightly more than half of its total revenue, and diversify into areas such as electric vehicle (EV) manufacturing which it sees as a $ 34 billion business by 2025

Apple had been trying to get ahead of further COVID-19 lockdowns by asking Foxconn to recruit iPhone 14 assembly workers earlier than usual, but that plan had to be abandoned almost immediately when “iPhone City” went into lockdown.

There is growing unrest in China at the severity of lockdown measures. Last week saw hundreds of MacBook Pro workers breaking through COVID-19 barriers intended to keep them inside a Chinese plant.

Apple has already warned that a range of problems could cost the company as much as $ 8B this quarter. The bigger concern, however, will be the impact to both supply and demand of the iPhone 14. While many factors are entirely outside Apple’s control, it’s massive dependence on China is a much longer-term structural problem for the company – and one we ‘ ve been warning about for many years.

We’ve always acknowledged that Apple couldn’t act overnight, and the company has made progress over the years in diversifying its manufacturing and assembly processes, but the pace of this has been glacial. It’s now been five years since even outside commentators could see the writing on the wall, and the Cupertino company still seems reluctant to take decisive action.

Foxconn has itself been diversifying production, including a recent plan for a $ 9B plant in Saudi Arabia.

According to a new report from The Wall Street Journal, the Saudi government is “reviewing an offer” from Foxconn for a “multipurpose facility that could make microchips, electric-vehicle components and other electronics-like displays.”

The report explains that Foxconn, formally known as Hon Hai Precision Industry, is looking to diversify its manufacturing presence due to “rising tensions between China and the US that put it in a potentially vulnerable spot.” In addition to a factory in Saudi Arabia, Foxconn is also reportedly in talks with the United Arab Emirates regarding the same project.

Photo: Trac Vu / Unsplash

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Naveen Kumar

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