Apple supplier Foxconn warns of slowing demand, and growing supply problems
Foxconn, a key supplier to Apple today warned that the quarter’s revenue may slip due to slowing demand as well growing supply-chain issues.
The chairman of Foxconn stated that many market uncertainties exist and that Foxconn will be seeking to diversify further to decrease its dependency on the smartphone assembly business.
Reuters reports.
Foxconn warns that its current quarter revenue from electronics, including smartphones, could drop as growth slows amid rising inflation and cooling demand. This is partly due to China’s lockdowns.
The largest contract electronics manufacturer in the world, Taiwanese, is facing a serious shortage of chips, just like global producers. This has hampered smartphone production, including that for major client Apple […]
“There is a lot of uncertainty in the market right now,” Foxconn chairman Liu Young-way said during a call after earnings. He cited the pandemic and geopolitical risk as well as inflation for this 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 dependance 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 The Wall Street Journal’s new report, the Saudi government “reviews a Foxconn offer for a multipurpose facility that could produce microchips and electric-vehicle parts as well as other electronic devices 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 U.S. 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.