Foxconn increases investments outside of China as consumer demand for electronics weakens

TAIPEI: Apple Inc supplier Foxconn said on Wednesday it plans to increase investment outside China and seek to attract automakers to its contract manufacturing business, as the company reported weaker 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 trying to avoid a possible blow to its business caused by trade tensions between Beijing and Washington.

“Customer demand guides our consideration of utilizing our production capacity in the ICT sector,” Foxconn Chairman Liu Young-way said on the earnings call, referring to information and communication technology.

He said the expansion is needed in countries such as the US, Vietnam, India, Mexico and China “in response to customer and supply chain adaptations”.

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

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

WEAK CONSUMER DEMAND

The world’s largest contract electronics manufacturer expected first-quarter and full-year revenue to remain unchanged, as weak demand for consumer electronics was offset by significant growth in computing, cloud, network and component products.

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

“We maintain a relatively conservative view on smart consumer electronics and believe they may decline slightly,” Liu said, citing factors such as last year’s high lows and inflation and the global economic slowdown.

Foxconn hit the headlines in November when restrictions to control COVID-19 prompted thousands of workers to walk out of a massive factory in the Chinese city of Zhengzhou, disrupting production ahead of Christmas and the January annual holiday.

Foxconn, which wants to replicate the success it had with the iPhone in electric vehicles, said many automakers are approaching it and approaching it.

“Foxconn is actively expanding its EV business in North America and working more comprehensively with traditional and emerging automakers,” Liu said.

Foxconn, formally called Hon Hai Precision Industry Co Ltd, has bought a former General Motor Co plant in Lordstown, Ohio, and has also hired former Nissan executive Jun Seki to lead its efforts to expand its electric vehicle business.

Liu said that revenue from electric vehicle components is expected to rise sharply to T$50 billion to T$100 billion this year from T$20 billion last year. In Ohio, Foxconn focuses on electric car batteries, while Wisconsin makes energy storage system (ESS) battery cells and batteries, he said.

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

Net profit for the October-December quarter fell 10 percent to T$40 billion ($1.3 billion) from a year earlier, the company said, in line with analysts’ estimates.

The company previously said production has returned to normal in Zhengzhou, which makes most of Apple’s premium models, including the iPhone 14 Pro.

Apple predicted last month that its revenue would decline for the second quarter in a row, but iPhone sales were likely to improve after production had returned to normal in China following the COVID shutdowns.

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