Foxconn Earnings & Outlook: What to know
Foxconn Technology Group, the biggest manufacturer of Apple’s iPhones, reported fourth-quarter results on Wednesday (March 16). The company 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.
Two of its factories in Shenzhen remain closed following recent Covid-19 outbreaks that have sent the city into lockdown. After a rise in covid cases, China ordered all nonessential businesses in the province to shut down for a week starting March 14. Foxconn is trying to shift production to other factories to limit disruption—but if the lockdown drags on, it could create supply challenges for Apple, which just announced a new line of products.
Like other companies with major operations in Shenzhen, Foxconn saw its stock price fall after Chinese officials announced the lockdown.
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.
Profit and revenue
Foxconn’s net profit fell 3.4% from a year earlier to 44.395 billion Taiwan dollars (US$1.55 billion) for the quarter ended December, narrowly beating the estimate of NT$43.66 billion taken from a poll of analysts by S&P Global Market Intelligence.
Fourth-quarter revenue decreased 5.9% from a year earlier to NT$1.890 trillion. Analysis: Despite revenue and net-profit declines, Foxconn’s operating-profit margin improved to 2.79% in the fourth quarter, compared with 2.57% the previous quarter and 2.56% a year earlier. Gross-profit margin was 6.03%, deteriorating slightly from 6.30% the previous quarter, but improving from 5.69% a year earlier.
Foxconn’s capital expenditures increased to NT$92.30 billion in 2021, up 41% from NT$65.50 billion in 2020 and compared with NT$77.52 billion in 2019.
Outlook
After a rise in covid cases, China ordered all nonessential businesses in the province to shut down for a week starting March 14. Foxconn is trying to shift production to other factories to limit disruption—but if the lockdown drags on, it could create supply challenges for Apple, which just announced a new line of products.
Like other companies with major operations in Shenzhen, Foxconn saw its stock price fall after Chinese officials announced the lockdown.
Foxconn executives 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. They further added that the pandemic has not eased, inflation is high and global politics are getting tense – and these will further complicate supply and demand and lead to great uncertainty to the company’s outlook.
Meanwhile, Foxconn is in talks with Saudi Arabia about jointly building a $9 billion multipurpose facility that could make microchips, electric-vehicle components and other electronics like displays, according to people familiar with the matter.
The Saudi government is reviewing an offer from the company to build a dual-line foundry for surface-mount technology and wafer fabrication in Neom, a tech-focused city-state the kingdom is developing in the desert. Discussions over the project started last year, according to a report by the Wall Street Journal.