Taiwan’s Foxconn raises full-year outlook on strong tech demand

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The Foxconn logo displayed on a Foxconn building in Taipei on January 31, 2019. Taiwan’s Foxconn, the world’s largest contract electronics maker, raised its full-year business outlook on Monday on strong sales of smartphones and servers despite concerns about slowing demand due to rising inflation.

Sam Yeh | AFP | Getty Images

Taiwan’s Foxconn, the world’s largest contract electronics maker, raised its full-year business outlook on Monday on strong smartphone and server sales despite fears of a slowdown in demand for due to rising inflation.

Like other global makers, the Taiwanese company is grappling with a severe chip shortage, which has hurt smartphone production, including for its biggest customer Apple, in part due to COVID-19 lockdowns in China.

But the company said in a statement late Monday that June sales jumped 31% from a year earlier to a record high for the month, thanks to proper supply chain management and the increase in sales of consumer electronics. Smartphones make up the bulk of its income.

Foxconn’s better-than-expected June sales come at a time when investors worry about slowing technology demand amid a downturn in major markets due to high inflation and the war in Ukraine.

Chip stocks across the world fell on Friday after memory chipmaker Micron Technology on Thursday forecast revenue significantly below expectations for the current quarter and said the market had “significantly weakened in a very short period of time.” time”.

Foxconn said it was optimistic about its third-quarter business, adding it could see “significant growth” from a year earlier.

For 2022, Foxconn said the outlook has improved from earlier expectations of no growth, without providing details.

The company, officially called Hon Hai Precision Industry, said it has recorded double-digit annual growth in sales of servers and telecommunications products so far this year.

The company said China’s COVID-19 controls had only a limited impact on its production as it kept workers on site in a “closed loop” system.

Analysts at Daiwa Capital Markets in Taipei said in a report that server demand from US-based cloud service providers helped propel double-digit growth for the sector. They expected Foxconn’s operating profit to rise 12-19% this year.

Morgan Stanley analysts said Foxconn’s upbeat forecast for the third quarter showed strong demand for cloud servers and iPhone assembly would continue.

Shares of the company rose around 3% in Tuesday morning trading, outperforming the broader market which rose around 1%.

They have fallen almost 1% so far this year, giving the company a market value of $46.52 billion.

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