Foxconn’s Profit Beats Estimate as Despite Demand for Smartphone Runs Low

Foxconn is the world’s largest contract electronics manufacturer. In its quarterly forecast, the company posted a better than expected profit from its smartphone business which will likely see a revenue weakness but at a slower pace this quarter.

However, in the months ahead, analysts expect the company to boost its revenue recovery underpinned by the launch of a new lineup of iPhones by Apple Inc in autumn. Apple is Foxconn’s major client.

In its second-quarter that ended in June, Foxconn reported a net profit of $778.54 million or T$22.9 billion which is 34% up from last year. It was also better than a consensus estimate of T$17.95 billion polled by Refinitiv.

According to the company, the stronger than expected figures are driven by the server and computing businesses as the revenue from its key consumer products dropped by more than 15% in the second quarter due to global hit on electronics demand from the pandemic.

In May, Foxconn had warned bleak smartphone sales for its second quarter citing the impact on demand due to the virus. However, with the work-from-home lifestyles, it offers them new growth opportunities.

In the third quarter, the company expects the revenue to report a double-digit decline as the consumer electronics division posted a drop of about 10% from a year earlier.

Liu Young, Foxconn Chairman, told an investor conference that the company gross margin could reach 7% by next year. Partly from its growth in the component business sector which includes electronics manufacturing.

The company was working on building two supply chains separately for China and the United States to avoid getting caught in the U.S.- China trade war.

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