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 largest global employers in the electronics manufacturing industry and a major supplier to Apple Inc (NASDAQ: AAPL) announced a sales decline of 11.77 percent in April, YoY basis. However, the company’s revenue was in line with prior estimates, which came in at T$429.2 billion, approximately $14 billion. As the smartphone shipment declines, the Taiwanese electronic company anticipates its sales to decline in the current quarter.
The company will, however, report first-quarter earnings results on May 11, when it is expected to issue full-year guidance. According to the company’s unaudited consolidated monthly revenue report for April, revenue in smart consumer electronics products delivered double-digit growth. Additionally, the company noted that cumulative revenue for the first four months of 2023 came in at NT$ 1,891.9 billion, down approximately 0.14 percent YoY.
“The decline in smartphone shipments during Q1 2023 marks the first ever Q1 decline since 2019 and is attributed to extended inventory, weakened demand, and inflation. The overall feature phone segment declined by 19 percent YoY is driven by muted demand and an increase in feature phone to smartphone upgrade,” Shipra Sinha, an analyst at Industry Intelligence Group CyberMedia Research noted.
Foxconn Sales and the Market Outlook
The company is heavily reliant on the global consumption of new products, especially from Apple. As the dollar purchasing power declines due to high inflation, Foxconn forecasts more pay. However, the company hopes Apple’s entrance to the Indian market will revamp its quarterly sales. Moreover, India is considered an emerging market with a high demand for electronics for its high population, although smartphone shipments declined by 21 percent YoY during the first quarter.
Nevertheless, Apple posted first quarter revenues of about $94.8 billion, down 3 percent YoY basis. As the global smartphone industry transitions from old to new products, Foxconn expects its sales to decline in the second quarter. Moreover, new products for Apple among other manufacturers are expected to come in at the end of the year as usual to coincide with holiday festivities.
Notably, Falcon shares dropped approximately 3 percent in the past month to trade around NT$ 53.80 on Friday. Nevertheless, it was a choppy day for the entire electronics industry with most down about 3 percent in the day.
Bigger Picture
The growth of artificial intelligence technology is expected to increase the overall demand for fast-processing electronics. Already, Microsoft Corporation (NASDAQ: MSTR), one of Foxconn’s major customers in North America, has made tremendous progress in AI development through collaboration with OpenAI. As a result, Foxconn is looking at profitable years ahead despite short-term constraints.
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