Apple supplier Foxconn cautious despite beating earnings forecasts

A factory at the mobile phone plant of Rising Stars Mobile India, a unit of Foxconn in Tamil Nadu, India, on July 12, 2019.

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Apple supplier Foxconn beat estimates for second-quarter earnings on Monday 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.

“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”.

Liu told an earnings briefing he sees a lot of potential in India, where Foxconn has rapidly expanded its manufacturing facilities, adding: “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 EV contract manufacturing market, said it is very likely to mass produce electric vehicle batteries at its troubled site in Wisconsin.

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 EV business expansion.

Within the AI server supply chain, Foxconn has won a “very high” market share for GPU modules and substrates, Liu said.

As generative AI applications explode, Foxconn is gaining momentum in servers for this segment and believes it can deepen collaboration with North American customers, Liu added, 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.”

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

The Taiwanese company said net profit for the April-June quarter slipped to T$33 billion ($1.0 billion) from a revised T$33.29 billion in the same period the previous year.

It was better than an average forecast of T$25.57 billion profit from 13 analysts, according to Refinitiv.

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.

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.

Shares in Foxconn, which assembles around 70% of iPhones, rose 1.4% ahead of its results, compared to a 1.3% fall in the main market. Its shares have risen 10% so far this year. S TW US

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