Apple vendor Foxconn warns of “material shortages”, profits

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Apple’s flagship supplier Foxconn on Tuesday reported lower fourth-quarter profits, which fell short of expectations as the pandemic hit margins, and warned of the impact of a “material shortage” amid tight global chip supplies.

The Taiwanese company, the world’s largest electronics maker, reported net profit from October-December of 45.97 billion TWD (approximately 11,850 kroner), down 4% from a year earlier, compared with 50 , 89 billion TWD (approximately 13 120 RV) crore) an average of 11 analyst estimates compiled by Refinitiv.

Chief Financial Officer David Huang said the company’s gross margin was affected by COVID-19 pandemic, but strong smartphone sales still contributed stronger than expected performance in the fourth quarter, although he did not give more details.

Officially called Hon Hai Precision Industry, Foxconn’s Revenues for the fourth quarter grew by 15% during the year.

This is mainly due to a more than 15 percent increase in revenue for the year from consumer electronics, including smartphones, which accounted for 63 percent of its business in the quarter, Foxconn said.

Earlier, the company predicted that revenues for the fourth quarter would be in the range of a decline of 3% and a profit of 3% compared to a year earlier.

Chairman Liu Young-way said he expected first-quarter revenue to be “better than normal” for the season thanks to strong sales of smartphones and remote controls amid a coronavirus-driven trend from home.

However, Liu said the company closely monitors the “shortage of materials” in the consumer electronics supply chain, which could hit less than 10 percent of customer orders, although he described the impact as limited.

“The pandemic and the shortage of materials could affect our performance ahead. That is why we are cautious,” he said, adding that he expects the shortage to continue until next year.

Until Liu provided specific data on the shortage, industry sources said the chip shortage, which hit the car industry for the first time, is now spreading to the entire e-business, including smartphones.

Earlier, Foxconn said it expects revenue to grow by about 10% in 2021.

Liu said Foxconn was in talks with “connected foundries” about a possible collaboration to produce electric vehicle (EV) chips, highlighting the company’s faint strength in special chip production. He did not give any details.

In recent months, the company has announced plans to become a major player in the global electric car market.

Shares of Foxconn rose nearly 41% this year. They ended 0.78% on Tuesday, compared to 0.48% growth in the wider market.

© Thomson Reuters 2021

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