Apple Supplier Foxconn Warns of Growth Slowdown Amid Inflation, Lower Demand

Apple supplier Foxconn on Thursday announced T$29.45 billion ($985.48 million USD) in net profit for the first quarter of the year, up 5% but slightly short of analyst estimates of T$29.76 billion — reports Reuters.

Foxconn also warned that revenue from its electronics business, including smartphone production, could take a hit as the Taiwanese company’s growth is bogged down by rising inflation, petering demand, and COVID-related lockdowns in China that are adding to the existing supply chain pandemonium.

“There are many uncertainties in the market at the moment,” Foxconn Chairman Liu Young-way said during a post-earnings call. Geopolitical tension surrounding Russia’s ongoing invasion of Ukraine also stands to affect business, said Liu. “They are presenting quite some challenges to demand and supply.”

Foxconn, the world’s largest contract electronics maker and maker of Apple products including the iPhone, was already seeing a severe strain on semiconductor supply, and China’s efforts to curb its largest COVID-19 outbreak in two years have made matters worse.

While the lockdowns had a “limited impact” on Foxconn’s output thanks to the company’s “closed loop” production system, people being required to stay home has driven down demand for the company’s products in one of its biggest markets.

The recent global economic downturn, caused by high inflation, and the ongoing war in Ukraine also slowed down business.

Liu noted that inflation is having an impact on demand for lower-end consumer electronics first, so Foxconn hasn’t been hit too badly given that most of its products are higher end.

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

Even though revenue grew by 4% in Q1, Foxconn projects revenue for the current quarter and for the full year to be relatively flat. The company does, however, expect significant growth for its other business, including components, computing products, and cloud and networking products in the year.

Consumer and smartphone electronics today account for more than half of Foxconn’s total revenue. The company is also expected to make a push into electric vehicle (EV) manufacturing, which it sees as a $34 billion business by 2025.

Earlier this month, Foxconn stopped hiring assembly line workers for its iPhone manufacturing facility in Zhengzhou, China, as the local government imposed yet another lockdown across the city.