Foxconn expects another half-year of chip shortage woes

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Foxconn expects another half-year of chip shortage woes

Apple supplier Foxconn forecast on Friday that a global chip shortage would run into the second half of 2022 and its fourth-quarter revenue for electronics, including smartphones, would fall more than 15 percent.

Chairman Liu Young-way said during a conference call that Foxconn was cautious about its 2022 revenue outlook, citing uncertainties surrounding the coronavirus pandemic, inflation, geopolitical tensions and supply chains.

Earlier Foxconn, the world's largest contract electronics maker, reported a 20 percent 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 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 to GM.

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 percent in the period. Analysts predicted an 11 percent 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 percent on the year, helped by strong smartphone demand that remained stable despite the supply problems.

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

Analysts had said they expected robust iPhone sales boosted Foxconn's business in the third quarter, and the company secured more than 75 percent 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.

Apple said last month that supply chain woes cost it US$6 billion in sales in the July-September quarter, and that this would worsen during the year-end holiday period.

Foxconn said it expects its electronic vehicle (EV) business to make a contribution to revenue in the third quarter of 2022, when it could start production in America in a partnership with Lordstown Motors Corp at the soonest.

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.

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

(US$1 = 27.8320 Taiwan dollars)

(Reporting by Yimou Lee and Sarah Wu; Editing by Kenneth Maxwell, Sayantani Ghosh and Alexander Smith)

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