Foxconn believes revenue may decline in Q1 2024 because of weak demand, slow iPhone sales

Foxconn Technology Group, the world’s largest iPhone assembler, anticipates a decline in revenue during the first quarter of 2024 due to sluggish global consumer electronics demand. The Taiwan-based company, also known as Hon Hai Precision Industry, did not specify the extent of the expected quarterly revenue drop.

However, it mentioned that the comparison would be against a high base from the same period last year when its mainland China factories resumed normal operations after pandemic-related disruptions were eased by the government.

In a statement on Friday, Foxconn highlighted that the first quarter typically constitutes an off-peak season for the industry.

The company reported a 5.4 per cent year-on-year decline in revenue for the December quarter, amounting to New Taiwan $1.85 trillion or US $60 billion. Although this figure was down by 7 per cent from 2022, total revenue for 2023 reached US $198.9 billion, reflecting a 20 per cent increase from the previous quarter.

Foxconn attributed the sluggish market demand in the fourth quarter to its static consumer electronics product business. The company faced challenges a year ago when its major iPhone plant in Zhengzhou, China, experienced workforce disruptions and protests amid a COVID-19 outbreak.

The dim outlook for the first quarter aligns with concerns raised by investors in major client Apple regarding sluggish iPhone sales, leading to two ratings downgrades for the tech giant.

Analysts are expressing concerns about the lacklustre performance of the iPhone 15 and the anticipated similar trend for the iPhone 16, citing weaknesses in China and subdued demand in developed markets.

The recent decline in Apple’s shares, following reports of the US Justice Department’s potential antitrust case, further adds pressure to Foxconn. Apple’s status as the world’s most valuable publicly-listed company since July 2022 is at risk, with approximately US $177 billion in market value erased so far in the current year.

Foxconn faces increased competition in the smartphone market from Huawei Technologies, which is gaining ground with strong demand for its new 5G handsets in China. Despite leading the global premium smartphone market, Apple faces challenges as Huawei’s Mate 60 series attracts attention in the same segment.

To address economic challenges and geopolitical tensions, Foxconn has been diversifying its manufacturing supply chain. The company recently gained approval to invest at least an additional US $1 billion in an Indian plant for Apple products.

Additionally, Foxconn is expanding its presence in mainland China, planning new factories in Henan province, as revealed by the province’s Development and Reform Commission.

(With inputs from agencies)