Apple partner Foxconn to increase investment outside China as demand for consumer electronics declines

Apple supplier Foxconn said on Wednesday it plans to increase its investment outside of China and its efforts to attract automakers to its contract manufacturing business, as the company reported a lower demand for consumer electronics.

Foxconn, which assembles about 70% of iPhones, has diversified production away from China, whose strict COVID restrictions disrupted its largest iPhone factory last year. The company is also seeking to avoid its business being affected by rising trade tensions between Beijing and Washington.

“It is customer demand that drives our thoughts on how to deploy our ICT production capacity,” Foxconn Chairman Liu Young-way said on a conference call, referring to information and communication technologies.

He said expansion was needed in countries including the United States, Vietnam, India, Mexico and China, “in response to customer and supply chain adjustments.”

Liu said that currently about 70% of the company’s revenue comes from products made in China, but “in the future, the proportion of overseas regions will continue to increase.”

Foxconn did not say how much its investment would increase by this year.

Low consumer demand

The world’s largest contract electronics maker expects first-quarter and full-year revenue to be flat as weak consumer electronics demand is offset by significant product growth computing, cloud, network and components.

More than half of Foxconn’s revenue comes from consumer electronics.

“We maintain a relatively conservative view of smart consumer electronics and believe it could decline slightly,” Liu said, pointing to factors such as last year’s high base as well as inflation and the slowdown in the world economy.

Foxconn made headlines in November when restrictions to control COVID-19 prompted thousands of workers to leave its huge factory in the Chinese city of Zhengzhou, disrupting production ahead of the Christmas and Lunar New Year holidays. of January.

Foxconn, which wants to replicate with electric vehicles the success it had with the iPhone, said it was approaching and being approached by many automakers.

“Foxconn will actively expand its electric vehicle business in North America and work more extensively with traditional and start-up automakers,” Liu said.

Foxconn, officially called Hon Hai Precision Industry, acquired General Motor’s former factory in Lordstown, Ohio and also hired ex-Nissan executive Jun Seki to lead its efforts in expanding the EV business.

Liu said EV component revenue is expected to rise sharply to between TWD 50 billion (about Rs 13,500 crore) and TWD 100 billion (about Rs 26,900 crore) this year, from TWD 20 billion (about Rs 5,400 crore). Last year. In Ohio, Foxconn will focus on batteries for electric vehicles, while Wisconsin will produce battery cells and energy storage system (ESS) batteries, he said.

The company has also expanded production of electric vehicle components in Mexico.

Net profit for the October-December quarter fell 10% to TWD 40 billion (around Rs 10,800 crore) from a year earlier, the company said, in line with analysts’ estimate.

The company previously said production had returned to normal in Zhengzhou, which produces the majority of Apple’s high-end models, including the iPhone 14 Pro.

Last month, Apple expected revenue to fall for a second straight quarter, but iPhone sales were expected to improve as production returned to normal in China after COVID-related shutdowns.

© Thomson Reuters 2023