Apple supplier Foxconn has reported a 1Q22 net profit of $958M, up by 5% year-over-year. However, the company warned that revenue might slow down moving forward due to rising inflation, cooling demand, and supply chain issues caused by China lockdowns.
Apple Supplier Foxconn Production Is Largely Unaffected by China Lockdown
The Financial Times reported Foxconn reiterated that the COVID-19 lockdown in China did not greatly affect its production capacity. Foxconn workers continued to work in a “closed-loop” system. But demand for products slowed down due to high inflation and the war in Ukraine. During the company’s earnings call, Foxconn Chairman Liu Young-way said that uncertainties presented challenges to demand and supply.
Still, the company’s profit for 1Q22 managed to post a good number. Foxconn generated a $958M profit, up by 5% year-over-year. The company reported the highest recorded profit in eight years.
Foxconn To On More Orders of iPads and MacBooks
Chen also said that his company will most likely take on more orders for producing iPads and MacBooks. He cited that its rival contract manufacturers, Compal and Quanta Computer, suffer from the China lockdowns.
“It has to be mainly market share gains because overall demand is certainly not trending up,” he said, adding that Foxconn can “benefit from their scale and their very spread-out operations”.
COVID-19 lockdowns also hit another Apple supplier, Pegatron which has its manufacturing capacity based in Shanghai, The Chinese city imposed the strictest COVID-19 control measures in all of China.
But Still, The Company Needs to Diversify
With the prediction of not so good profit margin in the coming months, Foxconn may have to reduce its reliance on smartphones and consumer electronics. These two products make up slightly more than half of the company’s revenue. Foxconn would need to diversify into other areas. A good option would be to focus on its electronic vehicle business. Foxconn recently announced that it will acquire an Ohio-based EV maker, Lordstown Motors. It will also set up a joint venture to develop electronic vehicles.