Today Apple’s contract manufacturer Foxconn announced fourth quarter earnings were lower than expected and had some other bad news to reveal. Reuters reports that the company expects the current shortage of chips and other materials needed for production to continue into the next year. Liu Young, Chairman of Foxconn, said, “The pandemic and shortage of materials could affect our future performance, so we are cautious.” The executive added that the impact of the bottlenecks is “limited”, affecting less than 10% of customer orders. Liu says that despite the problems, first quarter sales will be “better than normal” thanks to strong sales of smartphones and other devices such as tablets that have been used from home due to the pandemic.
For the three-month period October through December, Foxconn posted net income of $ 1.61 billion, a 4% decrease from the previous year. The winning number did not match the estimate of $ 1.78 billion created by averaging 11 analysts’ estimates. Foxconn CEO David Huang said that while the smartphone business was strong, the company’s gross margin was negatively impacted by COVID-19. Fourth quarter sales grew 15% annually, led by consumer electronics sales growth of 15%. 63% of the unit’s sales came from smartphones. The sales growth of 15% exceeded the company’s own forecast, according to which the gross profit for the fourth quarter should be between -3% and + 3% year-on-year.
The contract manufacturer Foxconn suffers from material and chip shortages
The global chip shortage has affected the production of automobiles, smartphones and other devices. It didn’t help that the world’s leading contract foundry, TSMC, is in a country (Taiwan) experiencing a severe drought. The lack of a typhoon last year led to the shortage that forced the foundry to organize 100 water tankers for a total price of $ 100,000. Each ship carries 20 tons of water.
Foxconn, Pegatron and Wistron produce more than 200 million Apple iPhone devices with Foxconn account for around 60% of the total annually.