Foxconn’s shares are up nearly 41% this year.By Yimou Lee
TAIPEI: Big Apple Inc supplier Foxconn posted lower fourth quarter earnings on Tuesday that fell short of expectations as the pandemic hit margins and warned of the impact of “material shortages” amid tight global chip supplies.
The Taiwanese company, the world’s largest manufacturer of contract electronics, posted net profits of T $ 45.97 billion (T $ 1.61 billion) from October to December, a 4% decrease from the previous year compared to the average of T $ 50.89 billion of 11 analyst estimates prepared by Refinitiv.
CFO David Huang said the company’s gross margin had been impacted by the COVID-19 pandemic, but strong smartphone sales still contributed to an above-expected performance in the fourth quarter, despite not elaborating on it.
Foxconn, officially known as Hon Hai Precision Industry Co Ltd, sales increased 15% year over year in the fourth quarter.
This was mainly due to a more than 15% year-over-year increase in sales of consumer electronics including smartphones, which accounted for 63% of business in the quarter, Foxconn said.
The company had previously forecast a 3% drop in sales for the fourth quarter and a 3% year-over-year increase.
Chairman Liu Young-way said he expects “better than normal sales” for the season in the first quarter, thanks to strong sales of smartphones and teleworking devices amid a coronavirus-induced work-from-home trend.
However, Liu said the company is closely monitoring “material shortages” in the consumer electronics supply chain and that this could hit less than 10% of customer orders, although the impact has been described as limited.
“The pandemic and shortage of materials could affect our performance in the future, so we are cautious,” he said, expecting the shortage to continue until next year.
While Liu did not provide specific information on the shortage, industry sources have said that a chip shortage that first hit the auto industry is now spreading to the electronics business, including smartphones.
Foxconn had previously announced that sales would increase by about 10% in 2021.
Liu said Foxconn is in talks with “related foundries” about a possible collaboration in making chips for electric vehicles (EV), heralding the company’s under-noticed strength in specialty chip manufacturing. He didn’t give any details.
The company has announced plans in recent months to become a major player in the global EV market.
Foxconn’s shares are up nearly 41% this year. They rose 0.78% on Tuesday, compared to a 0.48% increase in the broader market.