Technology
Tuesday, November 14th, 2023 2:53 pm EDT
Key Points
- Foxconn’s Strong Q3 Performance Despite Global Electronics Slump: Apple iPhone supplier Foxconn, officially known as Hon Hai, reported an 11.27% year-on-year increase in third-quarter profit, exceeding analysts’ expectations. The key financial results for the quarter ended September included operating revenue of NT$1.543 trillion, marking an 11.64% decline from the previous year. However, net income rose by 11.27% to NT$43.13 billion, outperforming the NT$38.75 billion net profit reported in the same period a year ago. Despite the ongoing consumer electronics slump, Foxconn’s resilience and performance indicate its ability to navigate challenging market conditions.
- Global Smartphone Market Dynamics:
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- Counterpoint Research Data: Counterpoint Research data revealed that global smartphone sell-through volumes in the third quarter experienced a 2% quarter-on-quarter growth, despite an 8% year-on-year decline. This drop represents the lowest third-quarter levels in a decade, marking the ninth consecutive quarter of decline in smartphone sales. The term “sell-through” refers to a consumer buying a product directly from a retailer.
- Positive Signs in Smartphone Market: While year-on-year volumes declined due to a slower-than-expected recovery in consumer demand, Counterpoint Research noted positive quarter-on-quarter growth, especially in September. Despite one full week less of sales for the new iPhones (iPhone 15 series launched on Sept. 22), the market’s positive performance in September is seen as a potential sign of positive news ahead.
- Challenges and Future Outlook for Foxconn:
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- Impact of Global Electronics Slump: The article highlights the ongoing electronics slump, attributing it to a significant impact on the global smartphone market. Demand for electronic goods, including smartphones, has slowed dramatically amid global macro uncertainties. Rising inflation rates have led consumers to cut back on purchases of consumer devices.
- Foxconn’s Future Expectations: Foxconn acknowledged potential challenges in its earnings report, stating that it expects monetary policies, inflation, geopolitics, and macroeconomics to affect its business in 2024. Despite the challenges, Foxconn continues to invest, with plans to invest over $600 million in a phone production project and a semiconductor equipment facility in the Indian state of Karnataka. The company anticipates that India could account for 20% to 30% of its manufacturing, similar to China.
- Chinese State Media Reports: In October, Chinese state media Global Times reported, citing unnamed sources, that multiple offices of Hon Hai’s subsidiaries across China had been subjected to tax audits and on-site investigations into land use. This adds a layer of complexity to Foxconn’s current business landscape and underscores potential regulatory challenges in China.
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Foxconn, also known as Hon Hai and a primary Apple iPhone supplier, reported an 11.27% year-on-year increase in third-quarter profit, surpassing analysts’ expectations despite a global slump in consumer electronics. The key financial highlights for the quarter ended September were:
- Revenue: $1.543 trillion New Taiwan dollars ($47.71 billion), compared to the expected NT$1.559 trillion.
- Net income: NT$43.12 billion, beating the expected NT$35.078 billion.
While the Taiwanese firm experienced an 11.64% decline in operating revenue from a year ago, it recorded an 11.27% increase in net income, reaching NT$43.13 billion, outperforming the NT$38.75 billion net profit reported in the same period a year ago.
Foxconn, the world’s largest contract electronics manufacturer, assembles consumer products such as Apple’s iPhones. Despite an ongoing decline in global smartphone sell-through volumes, with a year-on-year drop of 8%—its lowest third-quarter levels in a decade—the third quarter saw a 2% quarter-on-quarter growth, according to data from Counterpoint Research.
The third-quarter results indicate that while consumer demand recovery has been slower than expected, positive signs, especially in September, hint at a potential turnaround. Counterpoint Research believes the positive performance, even with one less week of sales for the new iPhones launched on September 22, may signal favorable news ahead.
Canalys reported a 1% drop in the global smartphone market in the third quarter, signaling a slowdown in the market’s decline. Regional recoveries and new product upgrades, particularly from Huawei and Apple, contributed to a double-digit sequential growth in the smartphone market during the third quarter.
Foxconn acknowledges the impact of the ongoing electronics slump on the global smartphone market. Demand for electronic goods, including smartphones, has slowed amid global macro uncertainties, and consumers have cut back on purchases due to rising inflation rates.
In its earnings report, Foxconn anticipates that factors such as monetary policies, inflation, geopolitics, and macroeconomics will affect its business in 2024. Despite the challenges, the company continues to invest, with plans to invest over $600 million in a phone production project and a separate semiconductor equipment facility in the Indian state of Karnataka.
Recent reports from Chinese state media suggest that multiple offices of Foxconn’s subsidiaries in China are undergoing tax audits and on-site investigations into land use, adding a layer of complexity to Foxconn’s current business landscape.
In summary, Foxconn’s better-than-expected third-quarter results, amidst challenging market conditions, indicate its resilience and adaptability in the face of a global consumer electronics slowdown and uncertainties in the broader macroeconomic environment.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/11/14/foxconn-q3-earnings-report-net-profit-jumps-11percent-beats-estimates.html
