Foxconn Sees Supply Chain Improvements For Second Half Of Year

Foxconn factory Shenzhen China 2005 - by Steve Jurvetson from Wikimedia

iPhone manufacturer Foxconn raises financial projections for second half of year as lockdowns ease in China and supply chain stability improves

iPhone manufacturer Foxconn on Tuesday raised its financial projections for the current quarter and the second half of the year, saying that lockdowns in Chinese cities such as Shanghai appeared to be easing and that this should improve the stability of its supply chain.

“We are quite confident in the stability of our supply chain for the second half of this year,” Foxconn chairman Liu Young-way said at the company’s annual shareholders’ meeting, Reuters reported.

The company earlier this month had warned of falling revenues for the current quarter, in part due to supply chain issues caused by widespread Covid-19 lockdowns in China, where the bulk of its production capacity is located.

The Shanghai government has said it is aiming to begin gradually easing lockdowns by early June, with ll residents in “low-risk” areas allowed to return to work from Tuesday.

Tesla's Gigafactory 3 in Shanghai. Image credit: Tesla
Lockdowns in Shanghai have affected companies including Tesla. Image credit: Tesla

Chip supplies

Foxconn said improved chip sourcing could make it the first electric vehicle (EV) manufacturer “not short on material supplies”.

The shortage of chips holding up EV production has been “a pain for our customers”, Liu said, adding that the supply chain situation for the second half of the year was moving “in a better direction”.

Earlier this month Foxconn said revenues from its electronics business, including smartphones, could slip in part due to supply chain issues.

The company also said growth was slowing due to rising inflation and lockdowns that had impeded customer spending.

Consumer electronics make up slightly more than half of Foxconn’s business. The company is trying to reduce its reliance on the sector by diversifying into areas such as EV manufacturing, which it sees as a $34 billion (£27bn) business by 2025.

Foxconn said this month it agreed to buy an Ohio-based factory from electric vehicle start-up Lordstown Motors for $260m and would set up a joint venture for producing EVs.

Market share growth

The plant, Foxconn’s first major EV production base in North America, is to start producing an electric pick-up for Lordstown and EVs for other clients starting next year.

The company said in an investor briefing on 12 May that China lockdowns had had a limited impact on its manufacturing because of a “closed-loop” system in which workers are kept on-site, and because it has a large number of facilities scattered around the country.

At the time Foxconn predicted strong growth in computing products, cloud products and components, in part because it was gaining market share from rivals such as iPad maker Compal and MacBook manufacturer Quanta Computer.

Compal and Quanta have both experienced more disruption than Foxconn from the latest round of lockdowns.

As a result of market share growth Foxconn at the time reported its highest first-quarter net income in eight years and raised its overall guidance for the current quarter.