Taiwanese techie talk a tip-off for better times?

Company News

by Glenn Dyer

Amid all the hype about supply chain hiccups, rising inflation, computer chip and component shortages, a trading update from the world’s biggest contract electronics manufacturer suggests a sudden improvement in a key part of the global economy.

Taiwan’s Foxconn said in a statement it was now optimistic about its business in the third quarter, thanks to a surge in sales in June and it now can see “significant growth” compared with a year earlier.

Foxconn said the outlook for 2022 had improved and it exceed its expectations for no growth, without providing details.

The company (named Hon Hai Precision Industry Co Ltd in full) said 2022 has so far shown double-digit yearly growth in sales from servers and telecommunications products.

The company has said that COVID-19 controls in China only had a limited impact on its production as it kept workers on-site in a “closed loop” system. The company employs 1.29 million people around the world, mostly in China, Taiwan, the US and Vietnam.

Foxconn raised its full-year business outlook this week thanks to strong tech sales from smartphones to servers despite concerns of slowing demand due to rising inflation.

Like other companies Foxconn has had to deal with severe shortages of computer chips and other components used in the extensive range of electronic goods it makes on behalf of the likes of Apple, Sony, Dell and BlackBerry.

Media reports say around 40% of Foxconn’s business is done for Apple and the rebound in June could be an early sign that the world’s biggest company is seeing better times.

While that has hurt smartphone production in China, the disruption has been small because Foxconn said its June sales jumped 31% from a year earlier to a record high for the month.

Foxconn’s better-than-expected June sales come at a time when investors have raised concerns about slowing tech demand during a downturn in major markets due to high inflation and the war in Ukraine.

Reuters reported that shares in computer chip makers fell last Friday after US memory chip maker Micron Technology significantly worse-than-expected revenue for the current quarter and said the market had “weakened considerably in a very short period of time.”

Foxconn’s improvement is only for June, so analysts will be waiting to see the July update in a month’s time but few other companies are as well placed to take the pulse of global demand and supply in electronics in near real time than Foxconn.

Foxconn’s trading updates for April and May were more upbeat than previously but the statement this week is the most confident for months.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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