October 24, 2021

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Foxconn profit jumps 30% as smartphone demand booms

Foxconn Technology Group updates

Apple supplier Foxconn reported a 30 per cent year-on-year jump in net profit for the second quarter on the back of strong demand for smartphones and computing products.

Net earnings were NT$29.8bn (US$1.1bn) in the three months to June, outperforming both the Taiwanese company’s expectations and analysts’ estimates while setting a record for the period. Revenue was up 20 per cent year on year to NT$1.4tn, also hitting a new high.

The world’s largest contract electronics manufacturer, which derives the bulk of its revenue from the assembly of Apple’s iPhone, said demand across its products would remain strong and forecast that third-quarter revenue would increase by between 3 and 15 per cent compared with the same period in 2020.

But Young Liu, chair, cautioned on the risk of renewed supply chain disruption due to Covid-19. “The pandemic appears to be expanding again in Asia. We will do everything we can to contain its impact in our operations, but since Asia is a key manufacturing base for electronic components, we have to see,” he said.

Foxconn predicted revenues from consumer electronics manufacturing would drop slightly in the third quarter compared with the second, but still show strong growth year on year. The company said demand for cloud and networking products was strong, but revenue in the segment was likely to decrease slightly because of a high base last year and component shortages.

Apple last month forecast that its revenue growth would slow, warning that a global chip shortage would start to hit iPhone production.

Foxconn, which has traditionally been focused on downstream electronics manufacturing, is building up semiconductor capabilities of its own. Over the past few months it has invested in DnEx, the parent of Malaysian chipmaker SilTerra, indirectly invested in KoreSemi, a chipmaker based in the Chinese city of Qingdao, and acquired a six-inch chip fabrication plant from Taiwanese company Macronix.

Liu said Foxconn’s semiconductor operations were expected to start contributing to revenues from next year, generating NT$2bn in 2022 and NT$50bn annually by 2025. The chips are largely earmarked for supplying the group’s fledgling business manufacturing electric vehicles (EV).

Apart from a previously announced EV plant planned for the US, Liu said the company also intended to build a plant in Thailand for supplying the south-east Asian market, and one in Europe. “Negotiations with our European partners are ongoing now,” Liu said.

Foxconn forecast that revenues from its EV components business, which so far mainly consists of making mechanical and plastic parts, would hit NT$10bn this year — a 40 per cent increase over 2020. It predicted that sales in the segment would grow even faster next year.

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