Apple supplier Foxconn cautious on 2022 revenue outlook

On Friday, Apple supplier Foxconn (2317. TW) predicted that a global chip scarcity would last into the second half of 2022, resulting in a 15% drop in fourth-quarter revenue for devices, including smartphones.

During a conference call, Foxconn Chairman Liu Young-way expressed caution regarding the company’s revenue outlook for 2022, citing uncertainties such as the coronavirus pandemic, inflation, geopolitical tensions, and supply chains.

Earlier Foxconn, the world’s largest contract electronics maker, reported a 20% jump in third-quarter profit.

“If not for supply shortages prospects for the fourth quarter could have been better,” he said, adding that supply of power management chips remained tight and a global chip crunch could last longer than his previous forecast of the second quarter.

“Regarding next year’s prospects, we will be relatively cautious in our outlook,” Liu added.

A year-long shortage of chips, initially due to sky-rocketing demand for smartphones and personal gadgets during the pandemic, spilled into the auto industry and disrupted production at companies ranging from Apple (AAPL.O) to GM (GM.N).

Foxconn previously said it felt only a small impact from the crisis but had cautioned that rising COVID-19 cases in Asia could hurt its supply chain.

As well as forecasting the slide in revenue in its consumer electronics business, which includes smartphones, Foxconn said it expected overall fourth-quarter revenue to fall between 3% and 15% in the period. Analysts predicted an 11% drop, according to a Refinitiv consensus estimate.

Still, Foxconn said it expected supply shortages in Southeast Asia to ease this month and the next.

The outlook came after a strong third quarter, in which revenue rose 9% on the year, helped by strong smartphone demand that remained stable despite the supply problems.

Net profit jumped to T$36.98 billion ($1.33 billion), beating a Refinitiv consensus estimate of T$31.73 billion.

Analysts had said they expected robust iPhone sales to boost Foxconn’s business in the third quarter, and the company secured more than 75% of assembly orders, including those for the latest iPhone 13. But they cautioned that supply chain problems could mute any further near-term increase in orders at Foxconn.

Liu said he was looking to build more EV partnerships with companies in places including the Middle East, India, and Europe to “serve the local markets”, but did not elaborate.

Foxconn has in recent months deepened its efforts to become a major player in EVs, including announcing deals to build cars with U.S. startup Fisker Inc (FSR.N).

Shares in Foxconn formally called Hon Hai Precision Industry Co Ltd, closed 1.4% higher ahead of the earnings release, versus a 0.4% gain in the broader market (.TWII).