Apple supplier Foxconn steps up investment outside China, as consumer
electronics demand dips
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[March 15, 2023] By
Yimou Lee and Sarah Wu
TAIPEI (Reuters) -Apple Inc supplier Foxconn on Wednesday said it plans
to ramp up investment outside of China and efforts to attract automakers
to its contract manufacturing business, as the company reported weaker
demand for consumer electronics.
Foxconn, which assembles around 70% of iPhones, has been diversifying
production away from China, whose strict COVID restrictions disrupted
its biggest iPhone plant last year. The company also seeks to avoid a
potential hit to its business from mounting trade tensions between
Beijing and Washington.
"It is customer demand that guides our considerations on how to deploy
our production capacity in the ICT field," Foxconn Chairman Liu
Young-way said on an earnings call, referring to information and
communications technology.
He said expansion was needed in countries such as the U.S., Vietnam,
India, Mexico and China, "in response to customer and supply chain
adjustments".
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Liu said currently about 70% of the company's revenue is derived from
products made in China, but "going forward the proportion of overseas
region will continue to increase."
Foxconn did not say how much its investment would increase by this year.
WEAK CONSUMER DEMAND
The world's largest contract electronics maker expected revenue for the
first quarter and full year to be flat, as weak demand for consumer
electronics would be offset by significant growth in computing, cloud,
networking and component products.
More than half of Foxconn's revenue comes from consumer electronics.
"We maintain a relatively conservative view towards the smart consumer
electronics and think they might decline slightly," Liu said, pointing
to factors including last year's high base as well as inflation and the
slowing global economy.
Foxconn grabbed headlines in November when curbs to control COVID-19
prompted thousands of workers to leave its massive factory in China's
Zhengzhou city, disrupting production ahead of Christmas and January's
Lunar New Year holidays.
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The Apple Inc logo is shown outside the
company's 2016 Worldwide Developers Conference in San Francisco,
California, U.S. June 13, 2016. REUTERS/Stephen Lam
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Foxconn, which wants to replicate with electric vehicles the success
it has had with the iPhone, said it was both approaching and being
approached by many automakers.
"Foxconn will actively expand its EV business in North America and
work more comprehensively with traditional and start-up car makers,"
Liu said.
Foxconn, formally called Hon Hai Precision Industry Co Ltd, has
acquired the former General Motor Co plant in Lordstown, Ohio and
has also hired a former Nissan executive, Jun Seki, to lead its
efforts in EV business expansion.
Liu said revenue from EV components is expected to rise sharply to
between T$50 billion and T$100 billion this year from T$20 billion
last year. In Ohio, Foxconn will focus on battery packs for EVs,
while Wisconsin will produce energy storage system (ESS) battery
cells and battery packs, he said.
The company has also been expanding production of EV components in
Mexico.
Net profit for the October-December quarter fell 10% to T$40 billion
($1.3 billion) from a year earlier, the company said, in line with
analysts estimate.
The company said previously that production has returned to normal
in Zhengzhou, which produces the majority of Apple's premium models,
including the iPhone 14 Pro.
Apple last month forecast its revenue would fall for a second
quarter in a row, but that iPhone sales were likely to improve as
production had returned to normal in China after the COVID-related
shutdowns.
($1 = 30.5870 Taiwan dollars)
(Reporting by Yimou Lee, Sarah Wu, Faith Hung and Ben Blanchard;
Writing by Ben Blanchard and Brenda Goh; Editing by Muralikumar
Anantharaman, Jamie Freed, Elaine Hardcastle)
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