Foxconn, the iPhone aggregator, expects a challenging operating environment from pandemic, inflation and war

Foxconn 2317 2.46%

Technology Group, the largest iPhone aggregator of Apple Inc. , a more challenging operating environment this year, citing the fallout on global supply chains from the protracted pandemic, geopolitical events and inflation.

The company also said on Wednesday that it had resumed some production at its plants in the southern Chinese city of Shenzhen after the coronavirus outbreak suspended operations there earlier this week.

It may take months for a clearer picture to emerge in terms of where the global supply chain is headed, given various volatile factors, said Yong Liu, president of Foxconn. While the impact of the ongoing war in Ukraine is limited for Foxconn, the resulting potential inflation could raise costs and impose pain on the global supply chain, he said on Wednesday’s earnings call.

Companies have suffered from rising raw material prices and supply chain disruptions as the Covid-19 pandemic, now in its third year, has led to production bottlenecks and shortages of vital components, such as semiconductors. The Russian invasion of Ukraine exacerbated the problems, with ports in Ukraine closed and oil and commodity prices soaring.

Taiwan-based Foxconn, officially known as Hon Hai Precision Industry Co., Ltd. , said full-year net profit rose 37% to NT$139.3 billion, or $4.9 billion, thanks to strong demand for consumer electronics, cloud and networking. products. However, net profit decreased slightly by 3% in the first quarter of October-December compared to the previous year.

Foxconn is Apple’s largest iPhone aggregator.


Photo:

Cheng Yun / DDB / Zuma Press

Mr. Liu said he has been “cautious but still positive” about Foxconn’s own outlook this year as demand for the latest smartphones, cloud and network products they contract to manufacture is expected to remain strong. The company expects revenue to remain mostly flat this year.

Separately, Foxconn said Wednesday that it will resume production at its campus in Shenzhen, where the world’s largest contract maker employs tens of thousands of workers who produce iPads and computers as well as some iPhones.

Foxconn said it was given the green light to do so by local authorities after the company promised to follow local rules to create a bubble-like environment in which factory employees could work. Under these anti-epidemic rules, employees are required to work, travel and live within the factory premises and cannot leave the site, according to the Shenzhen government.

A similar bubble-like arrangement was used when Beijing hosted the Winter Olympics earlier this year. After that, sports venues and hotels were cordoned off from the public, athletes and participants were prohibited from leaving previously approved locations, and moving between these locations on vehicles.

The company suspended operations at its Shenzhen campus on Monday after the city went into a one-week lockdown, shutting down public buildings such as gyms and bars and halting bus and subway services. A large number of residents were also confined to their homes.

The Covid-19 outbreak has also halted production in other major Chinese industrial centres, such as Changchun.

As countries ease Covid-19 restrictions, Hong Kong is adhering to a ‘dynamic zero Covid’ approach – with help from Beijing. The sudden rise in the number of cases has overwhelmed hospitals and threatened business confidence in the global financial centre. Photo: Bertha Wang/Bloomberg

The iPhone aggregator has sought to diversify its business beyond products from tech giant Cupertino, California in recent years. It recently made a foray into electric vehicle manufacturing, signing partnerships with automakers such as Jeep and Chrysler maker Stellantis NV and Los Angeles-based electric vehicle maker Fisker..

On Wednesday, Mr. Liu said Foxconn is stepping up efforts to make electric cars and planning to expand into the car battery industry. He had previously said that the company aims to supply about 10% of the global market annually by 2027, which is about three million electric cars.

write to Yang Jie at jie.yang@wsj.com

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