Apple supplier Foxconn cautious despite beating earnings forecasts
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[August 14, 2023] By
Sarah Wu and Faith Hung
TAIPEI (Reuters) -Apple supplier Foxconn beat estimates for
second-quarter earnings on Monday thanks to a booming artificial
intelligence sector but retained a cautious outlook for this year due to
global economic uncertainties.
The world's largest contract electronics maker downgraded its outlook
for full-year revenue to a slight decline from a previous guidance of
flat as it joins other companies grappling with a weak global economy
and a sluggish recovery in China.
"At present there are many external variables: global monetary policy
tightening, geopolitical tensions, inflation and other uncertainties,"
Chairman Liu Young-way said, describing Foxconn's outlook as "relatively
cautious".
Liu told an earnings briefing he sees a lot of potential in India, where
Foxconn has rapidly expanded its manufacturing facilities, adding:
"several billion dollars in investment is only a beginning".
Last month, Foxconn pulled out of a joint venture with Vedanta to make
semiconductors in India, but said it intended to apply for incentives
under the country's chip production plan.
Foxconn, which sees a growing EV contract manufacturing market, said it
is very likely to mass produce electric vehicle batteries at its
troubled site in Wisconsin.
Liu did not provide details.
Foxconn has made electric vehicles, or EVs, a big part of its
diversification plans, and has also hired a former Nissan executive, Jun
Seki, to lead its EV business expansion.
Within the AI server supply chain, Foxconn has won a "very high" market
share for GPU modules and substrates, Liu said.
As generative AI applications explode, Foxconn is gaining momentum in
servers for this segment and believes it can deepen collaboration with
North American customers, Liu added, offering a bright spot amid slower
demand for smartphones and PCs.
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Foxconn logo is seen in this
illustration taken, May 2, 2023. REUTERS/Dado Ruvic/Illustration/File
Photo
"AI growth has been strong, but we have not seen any pick-up for
other products."
Earlier, Foxconn posted a 1% drop in second-quarter net profit that
beat analyst expectations.
The Taiwanese company said net profit for the April-June quarter
slipped to T$33 billion ($1.0 billion) from a revised T$33.29
billion in the same period the previous year.
It was better than an average forecast of T$25.57 billion profit
from 13 analysts, according to Refinitiv.
Foxconn said it expected revenue for its smart consumer electronics
products to slightly decline year on year in the third quarter. That
group includes smartphones and makes up about half of Foxconn's
total revenue.
Overall revenue for the third quarter would also fall slightly, it
said.
Apple this month forecast that a sales slump would continue into
this quarter, sending shares down despite beating Wall Street sales
and profit targets in its fiscal third quarter.
Shares in Foxconn, which assembles around 70% of iPhones, rose 1.4%
ahead of its results, compared to a 1.3% fall in the main market.
Its shares have risen 10% so far this year.
($1 = 31.9140 Taiwan dollars)
(Reporting by Sarah Wu and Faith Hung; Additional reporting by Ben
Blanchard; Editing by Tom Hogue and Alexander Smith)
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