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Apple Supplier Foxconn Sees Strong 2024 as Fourth Quarter beats Forecasts

Apple Supplier Foxconn Sees Strong 2024 as Fourth Quarter beats Forecasts

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Foxconn, a major supplier to Apple, the computer behemoth, released a positive outlook for 2024 that calls for a sharp rise in sales. This optimistic forecast comes after a strong fourth-quarter performance that was fueled by an increase in the demand for AI servers.

Increase in Fourth-Quarter Profit

Apple Supplier Foxconn Sees Strong 2024 as Fourth Quarter beats Forecasts

Image Source: cnbc.com

An astounding 33% increase in net profit for the October–December period was revealed by Foxconn, amounting to T$53.14 billion ($1.69 billion). This represents a jump in fourth-quarter earnings. The firm attributes its success to the strong demand for AI servers and strong sales over the year-end Christmas season. This remarkable increase has surpassed market estimates.

High Need for AI Servers

Foxconn Chairman Young Liu underlined the company’s forecast of over 40% sales growth in this area for the year, highlighting the growing demand for AI servers. Foxconn hopes to benefit from the steady yearly growth that the AI server market is expected to have, matching or even exceeding industry projections for growth.

Strategies for Diversification and Expansion

Foxconn’s success may be attributed to its deliberate diversification into networking and cloud goods, as well as its foray into artificial intelligence (AI) servers, beyond its core industry of consumer electronics. Chief Financial Officer David Huang of the corporation stated that plans for increased capital expenditure growth in 2024 will be fueled by efforts to enter new markets including semiconductors and electric cars.

Caution Regarding First-Quarter Projections

Foxconn issued a warning stating that although it expects a successful year, first-quarter revenue is predicted to decrease when compared to the same period in the previous year. This drop is explained by the difficult market circumstances and the remarkable spike in sales that followed China’s lifting of its pandemic restrictions.

Also Read: Vodafone Sell Italian Unit to Swisscom for a Hefty €8 Billion

Apple's Influence

Foxconn’s great success is a result of its tight partnership with Apple, whose impressive smartphone sales results have had a favourable effect on Foxconn’s income streams. Nevertheless, Foxconn is still committed to growing its business outside of traditional consumer electronics, even in light of Apple’s recent success.

In conclusion, Foxconn’s optimistic 2024 view highlights its flexibility and resilience in negotiating changing market conditions. Foxconn wants to be at the top of the electronics industry by strategically focusing on AI servers and by being open to diversification and growth.

Foxconn

Foxconn expects ‘Limited Impact’ on Apple due to global chip shortage.

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The pandemic has taken a toll on every possible industry one can think of in the last year. There was a shortage of supply, hindrance in production, unavailable transportation, and several more obstacles in any business. One latest concern in the tech industry is regarding the shortage of chips that is creating a major disturbance in the semiconductor industry. The chip shortage has affected both the automotive and semiconductor industry on a global scale.

But, in response to the chip crisis situation, Foxconn mentioned last weekend that there will be “limited impact” on the company and its clients. Speaking of clients, Apple is one of the major clients of Foxconn, and since the clients are massive tech giants they always have a Plan B. With the advent of 2021, the pandemic though prevailing is easing, and Liu Young-way, chairman of the manufacturing conglomerate formally known as Hon Hai Precision Industry Co Ltd said that they expected the company to do better in the first half of 2021 (Gadgets 360).

Foxconn Global chip shortage

The global pandemic caused by COVID-19 created havoc across the globe. Though many small businesses were forced to shut down, the market for electronics boomed. During the lockdown, demand for laptops and gaming consoles increased unexpectedly as people were getting more inclined towards enjoying and working from the confinement of home. In the beginning, we didn’t have any choice but now people are adapting to this lifestyle. So, demand for good electronics, especially laptops, smartphones, and good connectivity are not going down anytime soon.

Foxconn
Image Source: scmp.com

Due to this sudden escalation in demand for electronics, chip-making companies faced some difficulties in manufacturing and constant supply. So, the chip manufacturers have to reallocate their supply for the tech industry and away from the automotive sector. A sudden shift in supply from one sector to another was going to create a shortage in the automobile industry. But, it was not possible for the chip manufacturers to meet the demand in both sectors simultaneously amidst the pandemic.

Chip shortage in many sectors

The chip shortage caused many big automobile brands like Volkswagen AG, General Motors Co, and Ford Motors Co to cut their output capacity. Because without the chips, the final model won’t be ready for sale. The chip shortage affected the automotive industry with a huge jolt but eventually, the crisis had its impact on the smartphone sector. In the smartphone industry, the companies faced a shortage in application processors, display driver chips, power management chips, etc. But, the common people didn’t face the impact of this smartphone sector crisis in a great amount.

Amidst the crisis, chip manufacturers are likely to prioritize the biggest customers. Hence, it can be predicted that Apple is going to suffer the minimal impact of the chip crisis scenario. Foxconn’s biggest customer is Apple and it also has another advantage due to its large size hence a global presence. Though big companies have also faced crises during the beginning of the pandemic, they absorbed the shock much more efficiently than the smaller businesses.

Other interest of Foxconn

Though Apple is Foxconn’s biggest priority currently, the company is still looking out for growth opportunities in other sectors. Foxconn is showing its current interest in electric vehicles (EV) and Liu has further mentioned that their EV platform (MIH EV Open Platform) currently has around 736 partner companies participating from around the globe. The company is extensively working on this area and Liu believes that two or three models for presentation will be ready by the end of the fourth quarter. But, he has also mentioned that EV’s contribution to the company won’t be significant before the next couple of years.

For
contributing significantly in the area of EV, last month Foxconn and Zhejiang
Geely Holding Group came into a joint partnership which will provide contract
manufacturing for automakers. This new venture is shared equally between the
two companies who will also provide consultancy service for EV technologies.
Apple is also planning to launch self-driving cars by 2024.

Every
company is trying to evolve and keep up with the evolution in technology. But.
among all these giant businesses, Tesla is the one that is way ahead of all its
rivals.

Foxconn

Foxconn shift some Apple production to Vietnam to minimize China risk

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The advent of the global pandemic has already destabilized the economic condition around the world that might take years to repair and heal. And, amidst such a crisis tension between America and the Republic of China increases as former US President Donald Trump openly blames China for the novel coronavirus. With Trump’s exit from the White House and Joe Biden’s incoming administration, the intensity of impact due to the Sino-American conflict depends on how America can sustain and strengthen its competitive advantages.

But, keeping in mind that the impact of the Sino-US war can fall heavy on the businesses, Foxconn is moving a part of iPad and MacBook assembly to Vietnam from China. The decision has been taken at the request of Apple Inc. This way the company can both minimize the effect of the Sino-American war in its production and business and expand the Vietnamese market. The plant in Vietnam is expected to come online in the first half of 2021.

Foxconn Taking production out of China

Under Trump’s administration, he has repeatedly asked the US firms to take their production out of China. The relationship between the two nations in terms of trading and beyond has gone stale especially after the open accusation. Few months after the outbreak of COVID 19, Trump also decided the ban TikTok as it was responsible for data theft by the Chinese government. He further made some amendments to Clean Network System so that the privacy of every US citizen is protected. Trump didn’t only stop at this as United Nations especially targeted the made in China electronics for higher import tariffs. A restriction in the trade for products using US technology to supply in China was made as it put the nation at risk. No business wants to get caught up in this nasty trade war which can be the end of their market. So, some other Taiwanese manufacturers are also planning to shift some of their production units to countries like Vietnam, India, and Mexico.

Foxconn plan for Apple

Currently, Foxconn is planning to shift the assembly lines for Apple’s iPad tablet and MacBook laptop to the northeastern Vietnamese plant in Bac Giang province. The company has started building the assembly lines as announced in July of this year and will start production by the first half of next year. The source of this news is anonymous as the plan of Foxconn in the Vietnamese market is private. But, the company has not been clear about the fraction of production it is planning to take out of China. The person though has informed that Foxconn is doing this at Apple’s request as the latter wants to “diversify production following the trade war”. So, to support the Vietnamese expansion, Foxconn announced an investment of $270 million to open a new subsidiary called FuKang Technology.

Foxconn
Image Source: businessconnectindia.in

Foxconn has denied commenting on the details about the plan. The company said that due to the reasons of commercial sensitivity they will not comment on any aspect of work revolving around its customers. Apple didn’t choose to make any comments either. Shifting the production of China will also mark a date in history for Foxconn as this will be the first time the company will not assemble iPad in China.

Products other than iPad and MacBook

News has spread that the production in the Vietnamese plant will go beyond Apple’s products. The contract manufacturer has plans to assemble television sets in this new plant for Sony. The production is scheduled for late 2020 to early 2021. But, Sony has declined to comment. Foxconn has a plan to produce more than just Apple’s product meaning it might eventually have a good grip on the Vietnamese electronic market. The anonymous person has informed that the new plant will also manufacture computer keyboards.

Other Asian markets

Foxconn has planned to invest a handsome amount in the Indian market as well. The company has already made plans to spend up to $1 billion in India for iPhone assembly. Apple is requesting to expand business in other markets anywhere beyond China. And, India is a land that produces quality engineers every year. So, it is a smart move for Foxconn to invest such a bulky amount in India. The company is also considering building plants in Mexico.

Terry Gou : The Founder & Chairman of Foxconn

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Terry is also called the Trump of Taiwan for his resemblance to the former in the matter of wealth, influential business empires and the number of marriages. Always avoiding the media attention this business tycoon knows how to handle the competition as well as the market pressure. Even being a part of many controversies, he never failed to amaze people with his tactics. By never compromising the quality, Terry’s Foxconn has become one of the biggest electronics contract manufacturing companies.

Early Life

Gou was born on 8 October 1950, in Banqiao, Taipei County, Taiwan. His father was in the police. His parents moved from China to Taiwan in 1949, when the civil war occurred in China. Terry is the elder son among the three children of his parents. Later, his brothers Tai-Chiang Guo and Tony Guo also became successful businessmen of Taiwan.

Terry Gou
Image Source: forbes.com

Gou received a proper high school education followed by a college graduation. Until the age of 24, he tried his luck in every kind of jobs, from working in a rubber factory and at a grinding wheel, to working in a medicine plant.

Founding of Foxconn

After working at the various places, in 1974, Gou started a company named Hon Hai, in his hometown in Taiwan. He investing $7500, rented a shed and employed ten elderly persons as his first workers. His company produced the parts of television sets. In 1980, he received his first big order of making console joysticks, from Atari. After completing a big order, an encouraged Gou thought of expanding his business and approaching many other big companies. So he flew for an eleven months long business trip to the USA.

Despite being uninvited at many places, Terry’s stubbornness helped him to break into companies and receive many orders from them. He was even kicked out of many places several times. His determination made him grab other greatest opportunities and hence, he managed to establish his largest factory in mainland China, in Shenzhen, in 1988.

Terry was hardworking and was always aware of his goals. His hard work paid off and he soon bagged many big deals with multinational companies like IBM, Blackberry, Intel, Playstation, HP, Apple, etc. Today, he is one of the biggest tech giants and in 2016, Forbes listed his net worth at US$10.6 billion. Along with Foxconn, he also owns the HMD Global, that sells Nokia branded phones.

Personal Life

Terry has lived a controversial professional as well as private life. He has been in the spotlight for his sharp comments and also for his affairs. One of his affairs also led him to a blackmail situation. Even the police were involved which later got control of the situation, but, the case ruined his reputation.

Terry was married to Serena Lin. In the year 2000, he started an educational charity with Lin and donated one-third of his wealth to charity. Lin died in 2005 from breast cancer. He has a son and a daughter with her.
Later, he married Delia Tseng, on 26 July 2008. Tseng is a choreographer by profession. The two have three children together. Terry and Delia have decided to donate 90% of their wealth to charity.