The Taiwanese company Foxconn still produces about half of all Apple smartphones, so the situation of its largest customer has a significant impact on its own business. A seasonal pick-up in smartphone demand, even if observed this quarter, will not result in Foxconn’s revenue growth, and overall annual revenue will decline for the first time since 2016. However, Foxconn unexpectedly posted a sharp increase in profits in the third quarter.
For many investors, the surprise was that Foxconn’s net income grew 11% to $1.3 billion in the third quarter, as they were largely expecting a decline of the same 11%, but such momentum was not successful operational business, but in connection with a lump sum payment as part of the transaction. Foxconn’s sales are expected to decline slightly in the current quarter, although not as much as previously expected. Based on the results of the entire current year, the company will have to expect a slight decline in sales for the first time since 2016.
In the components business, Foxconn’s sales for the current quarter are expected to remain at last year’s level, company officials said, although growth was previously expected. As you know, Apple recently left its sales forecast for the fourth quarter at the same level as the same period last year.
Foxconn’s revenue fell 12% to $47.6 billion last quarter, and if the negative trend continues in the current quarter, the company’s revenue will have declined for three consecutive quarters. According to outside analysts, Foxconn’s fourth-quarter revenue will fall 4% year-over-year to $58.4 billion and fall 6.3% to $192 billion for the full year for the first time since 2016. According to Foxconn Management, the company’s financial position will gradually improve in the second half of the year. The company generates around half of its revenue from contract manufacturing of consumer electronics, including smartphones.
The extent to which Foxconn’s business will be affected by the investigations initiated by the Chinese authorities into possible violations of tax law and the sale of real estate in China was not explained at the quarterly reporting conference.