The growth of artificial intelligence technology is expected to increase the overall demand for fast-processing electronics.
Foxconn Technology Co Ltd (Taiwan: 2354), one of the world’s largest electronics manufacturers and a major supplier to Apple Inc (NASDAQ: AAPL), reported a sales decline of 11.77 percent in April, year over year. However, the company’s revenue was in line with previous estimates, which came in at NT$429.2 billion, roughly US$14 billion. With smartphone shipments declining, the Taiwanese electronics company expects its sales to decline in the current quarter.
However, the company will report first-quarter earnings results on May 11, when it is expected to issue guidance for the full year. According to the company’s unaudited consolidated monthly revenue report for April, revenue from smart consumer electronics products achieved double-digit growth. In addition, the company indicated that cumulative revenue for the first four months of 2023 reached NT$1,891.9 billion, down nearly 0.14 percent year-on-year.
The decline in smartphone shipments during the first quarter of 2023 marks the first-ever decline in the first quarter since 2019 and is attributed to overstocking, weak demand and inflation. The feature phone segment overall is down 19 percent year-on-year driven by weaker demand and an increase in feature phone upgrades to smartphones,” Shipra Sinha, Analyst at Industry Intelligence Group CyberMedia Research male.
Foxconn Sales and Market Outlook
The company relies heavily on global consumption of new products, especially from Apple. With the dollar’s purchasing power declining due to rising inflation, Foxconn expects more wages to come. However, the company hopes that Apple’s entry into the Indian market will renew its quarterly sales. Moreover, India is an emerging market with higher demand for electronics due to its rising population, despite smartphone shipments declining 21 percent year-on-year during the first quarter.
However, Apple reported first-quarter revenue of about $94.8 billion, down 3 percent year over year. As the global smartphone industry transitions from old to new products, Foxconn expects its sales to decline in the second quarter. Moreover, new products from Apple among other manufacturers are expected to come at the end of the year as usual to coincide with the holiday celebrations.
Notably, shares of Falcon fell about 3 percent in the past month to trade around NT$53.80 on Friday. Still, it was a choppy day for the entire electronics industry, with most of it down about 3 percent on the day.
The bigger picture
The growth of artificial intelligence technology is expected to increase the overall demand for fast-processing electronics. Microsoft Corporation (NASDAQ:MSTR), one of Foxconn’s major North American customers, has made tremendous progress in developing artificial intelligence by collaborating with OpenAI. As a result, Foxconn is looking forward to profitable years ahead despite the short-term constraints.
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