Taiwan's Foxconn raises full-year expectations due to strong tech demand

Foxconn

The largest contract electronics manufacturer in the world, Foxconn of Taiwan, increased its full-year business outlook on Monday due to robust sales of servers and smartphones, allaying worries that demand might drop due to rising inflation.

Like other international manufacturers, the Taiwanese company has struggled with a significant chip scarcity that has hampered the production of smartphones, particularly those for its key client Apple, partly because of COVID-19 lockdowns in China.

However, the business claimed in a late-Monday statement that effective supply chain management and soaring consumer electronics sales were to blame for June revenues increasing 31 percent from a year earlier to a record high for the month. The majority of their revenue comes from smartphones.

Foxconn's higher-than-anticipated June sales came as investors worry about declining electronics demand during a slowdown in major markets brought on by high inflation and the conflict in Ukraine.

After memory chip manufacturer Micron Technology Inc. forecasted significantly lower-than-expected revenue for the current quarter and claimed the market had "weakened considerably in a very short period of time," chip stocks all over the world fell on Friday.

Foxconn expressed optimism for its company in the third quarter and added that it might experience a "substantial increase" when compared to the same period last year.

Without giving further specifics, Foxconn said that the forecast for 2022 had changed from earlier predictions of little growth.

The business, formerly known as Hon Hai Precision Industry Co Ltd, said that so far this year, sales of servers and telecoms products have increased by double digits annually.

The company claims that while COVID-19 controls in China maintained employees on-site in a "closed-loop" system, they only had a little impact on its production.

In research, analysts at Daiwa Capital Markets in Taipei said that the demand for servers from US-based cloud service providers contributed to the industry's double-digit rise. They anticipated a 12–19% increase in Foxconn's operating profit this year.

According to Morgan Stanley analysts, Foxconn's optimistic third-quarter estimate demonstrated that strong demand for cloud servers and iPhone manufacturing will persist.

In early Tuesday trade, the company's shares increased by approximately 3 percent, surpassing the TWII, the larger market, which increased by around 1 percent. Foxconn's market worth is now $46.52 billion after its shares fell by over 1% this year.

Source: REUTERS