INTRO: Taiwan-based contract manufacturing company, Foxconn, reported better-than-expected profit in the last quarter, driven by the server and computing businesses. Revenues from its key consumer products, however, dropped more than 15% year-on-year as the coronavirus pandemic hit global electronics demand.
Overall, the company reported a net profit of T$22.9 billion ($778.54 million), up 34% from a year earlier. In the current quarter, Foxconn says it expects overall revenues to post a double-digit decline YoY, while revenues from the consumer electronics division will also decline by about 10% from a year earlier.
Talking to investors at the company’s earnings call in Taipei, Foxconn Chairman, Liu Young-way, said that the company might increase its gross margin to 7% next year, boosted partly by growth from its component business sector, which includes the production of key parts for electronics manufacturing. Its gross margin was 5.91% in the April-June quarter.
He also hinted that the escalating tensions between the US and China is affecting the company adversely. “The world factory no longer exists”, he said, adding that the company currently manufactures around 30% of its products outside of China, and that number could increase in the future. He, however, refused to elaborate on the subject any further.
Foxconn, of course, manufactures most of Apple’s flagship iPhones and is one of the biggest beneficiaries of the increasing popularity of iPhones over the past several years. However, with the increasing tensions between China and the US, the company is having to rethink its long-standing practices and is building a separate supply chain for its US clients with investments in Wisconsin, Mexico, Brazil, and Southeast Asia.