Foxconn revenue to fall | Stock market chart showing decline

In the second piece of somewhat gloomy iPhone news this morning, Foxconn revenue will fall during the holiday quarter, according to the company. This contrasts with its earlier forecast of growth.

More than half of that revenue comes from Apple, as the Cupertino company faces a triple challenge in China

Foxconn revenue forecast to fall

Bloomberg reports.

Hon Hai Precision Industry Co. warned revenue will decline for the third straight quarter, spurring concerns about demand for Apple Inc.’s latest iPhone and consumer electronics […]

Taipei-based Hon Hai, the main public arm of Foxconn Technology Group, gets more than half of its business from Apple. The iPhone 15 series, released in September, has fallen shy of its predecessor in China ahead of the crucial end-of-year shopping season.

The assembler lowered its outlook for its components business to flat relative to last year, after previously forecasting growth. Apple warned this month that revenue in the December quarter will be about level from 2022 as the company grapples with an unexpected challenge from Huawei Technologies Co. and an increasingly hostile business environment in China.

Foxconn expects revenue to fall around 4% year-on-year, which would put its total 2023 revenue down more than 6% – the first annual fall in seven years.

Triple trouble in China

Apple is facing three separate challenges in China.

First, surprise competition from local brand Huawei as we explained earlier today.

Huawei’s lead over Apple peaked in 2020, when the US imposed tech sanctions on China. These blocked the export of 5G chips from the US to China. Given that 5G capabilities was by then a must-have for any premium phone, Huawei’s sales fell off a cliff.

But Huawei this year launched the hugely successful Mate 60, a premium phone with a 5G chip made by a Chinese company – something tech experts had considered impossible in the time timescale. 

Surprise at this development wasn’t limited to the tech sector – it was even raised by the US National Security Advisor during a recent White House press briefing. The two main theories are sanctions-busting, to obtain US-made chips which were rebranded as Chinese ones, and industrial espionage, where China has obtained unauthorized access to US chip designs.

Second, the Chinese government has responded to US sanctions by … discouraging … government agencies from buying iPhones.

China has hit back by trying to hurt iPhone sales in the country. There was initially talk of a ban on government employees using iPhones. China denied this, but muttered vaguely about unspecified “security incidents” with the devices. The US government called this an “inappropriate retaliation.”

Third, there is the risk of disruption to iPhone production in the country, thanks to political fallout from Foxconn’s founder standing for election in Taiwan.

A Chinese investigation of Foxconn has been announced by state media. Apple is massively dependent on Foxconn, with a single plant in China estimated to be responsible for as much as 80% of global iPhone production.

China accounts for roughly 20% of global iPhone sales.

Photo: Maxim Hopman/Unsplash

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