Apple supplier Foxconn's profit slips, warns on 'materials shortages'

TAIPEI: Major Apple supplier Foxconn on Tuesday (Mar 30) posted a lower fourth-quarter profit that lagged expectations as the COVID-19 pandemic hit margins, and warned of the impact of "materials shortages" amid tight global chip supplies.

The Taiwanese firm, the world's largest contract electronics maker booked an October to December net profit of NT$45.97 billion (US$1.61 billion), a 4 per cent decline from a year earlier, and compared with the NT$50.89 billion average of 11 analyst estimates compiled by Refinitiv.

Chief Financial Officer David Huang said the company's gross margin was hit by the COVID-19 pandemic but strong smartphone sales still contributed to stronger-than-expected performance in the fourth quarter, though he did not elaborate.

Formally called Hon Hai Precision Industry, Foxconn's fourth-quarter revenue rose 15 per cent on the year.

That was mainly driven by a more than 15 per cent revenue increase on the year from consumer electronics including smartphones, which accounted for 63 per cent of its business in the quarter, Foxconn said.

The company had previously forecast fourth-quarter revenue to be in a range of a decline of 3 per cent and gain of 3 per cent from a year earlier.

Chairman Liu Young-way said he expected first-quarter revenue to be "better than normal" for the season thanks to strong sales of smartphones and telecommuting devices amid a coronavirus-induced work-from-home trend.

Liu, however, said the company is closely monitoring "materials shortages" in the consumer electronics supply chain and that could hit less than 10 per cent of client orders, though described the impact as limited.

"The pandemic and the materials shortage could impact our performance going forward. That's why we are being cautious," he said, adding that he expected the shortage to continue until next year.

While Liu did not give specifics on the shortage, industry sources have said a chip shortage that first hit the auto industry is now spreading across the electronics business including smartphones.

Foxconn had previously said it expected revenue to grow about 10 per cent in 2021.

Liu said Foxconn was in talks with "related foundries" on possible collaboration to make chips for electric vehicles (EV), touting the company's little-noticed strength in speciality chips manufacturing. He gave no details.

The company has in recent months announced plans to become a major player in the global EV market.

Shares of Foxconn have climbed almost 41 per cent this year. They ended up 0.78 per cent on Tuesday, compared with a 0.48 per cent rise in the broader market.