Apple supplier Foxconn cautious amid slower demand for smartphones

Apple supplier Foxconn downgraded its outlook for full-year revenue to a slight decline from a previous guidance of flat as it joins other companies grappling with a weak global economy. It assembles around 70% of iPhones sold in the world. 

Apple supplier Foxconn beat estimates for second-quarter earnings thanks to a booming artificial intelligence sector but retained a cautious outlook for this year due to global economic uncertainties.

The world's largest contract electronics maker downgraded its outlook for full-year revenue to a slight decline from a previous guidance of flat as it joins other companies grappling with a weak global economy and a sluggish recovery in China. It assembles around 70% of iPhones sold in the world. 

"At present there are many external variables: Global monetary policy tightening, geopolitical tensions, inflation, and other uncertainties," chairman Liu Young-way said, describing Foxconn's outlook as "relatively cautious".

Mr Liu told an earnings briefing he sees a lot of potential in India, where Foxconn has rapidly expanded its manufacturing facilities, adding that "several billion dollars in investment is only a beginning".

Last month, Foxconn pulled out of a joint venture with Vedanta to make semiconductors in India but said it intended to apply for incentives under the country's chip production plan.

Foxconn, which sees a growing electric vehicle contract manufacturing market, said it is very likely to mass produce electric vehicle batteries at its troubled site in Wisconsin. Mr Liu did not provide details.

Foxconn has made electric vehicles, or EVs, a big part of its diversification plans, and has also hired a former Nissan executive, Jun Seki, to lead its electric business expansion.

As generative AI applications explode, Foxconn is gaining momentum in servers for this segment and believes it can deepen collaboration with North American customers, Mr Liu said, offering a bright spot amid slower demand for smartphones and PCs.

"AI growth has been strong, but we have not seen any pick-up for other products," he said.

Foxconn posted a 1% drop in second-quarter net profit that beat analyst expectations.

Smartphones

Foxconn said it expected revenue for its smart consumer electronics products to slightly decline year on year in the third quarter. That group includes smartphones and makes up about half of Foxconn's total revenue. 

Apple is asking suppliers to produce about 85 million units of the iPhone 15 this year, roughly in line with the year before, Bloomberg News has reported. That should hold shipments steady despite tumult in the global economy and a projected decline in the overall smartphone market. But the move is likely to increase revenue because Apple is considering raising the price for Pro models.

Overall revenue for the third quarter would also fall slightly, it said.

Apple this month forecast that a sales slump would continue into this quarter, sending shares down despite beating Wall Street sales and profit targets in its fiscal third quarter.

 Reuters and Bloomberg