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Taiwan’s Foxconn raises full-year outlook on strong tech demand

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The Foxconn logo displayed on a Foxconn constructing in Taipei on 31 January 2019. Taiwan’s Foxconn, the world’s largest contract electronics maker, raised its full-year business outlook on Monday because of strong sales of smartphones and servers despite concerns of slowing demand on account of rising inflation.

Sam Yeh | AFP | Getty Images

Taiwan’s Foxconn, the world’s largest contract electronics maker, raised its full-year business outlook on Monday because of strong sales of smartphones and servers despite concerns of slowing demand on account of rising inflation.

Like other global manufacturers, the Taiwanese firm has grappled with a severe shortage of chips, which has hurt smartphone production including for its major client Apple, partly on account of COVID-19 lockdowns in China.

But the corporate said in a press release late on Monday that June sales jumped 31% from a 12 months earlier to a record high for the month, because of appropriate supply chain management and rising sales of consumer electronics. Smartphones make up the majority of its revenue.

Foxconn’s better-than-expected June sales come at a time when investors are concerned about slowing tech demand during a downturn in major markets on account of high inflation and the war in Ukraine.

Chip stocks the world over tumbled on Friday after memory chip maker Micron Technology forecast on Thursday significantly worse-than-expected revenue for the present quarter and said the market had “weakened considerably in a really short time period.”

Foxconn said it was optimistic about its business within the third quarter, adding it could see “significant growth” compared with a 12 months earlier.

For 2022, Foxconn said the outlook has improved compared with earlier expectations for no growth, without providing details.

The corporate, formally called Hon Hai Precision Industry, said it has seen double-digit yearly growth in sales from servers and telecommunications products thus far this 12 months.

The corporate has said that COVID-19 controls in China only had a limited impact on its production because it kept staff on-site in a “closed loop” system.

Analysts at Daiwa Capital Markets in Taipei said in a report demand for servers from U.S.-based cloud service providers helped propel double-digit growth for the sector. They expected Foxconn’s operating profit to grow 12-19% this 12 months.

Morgan Stanley analysts said Foxconn’s upbeat guidance for the third quarter showed that strong demand for cloud servers and iPhone assembly will proceed.

The corporate’s shares rose about 3% in Tuesday morning trade, outperforming the broader market which was up around 1%.

They’ve dropped nearly 1% thus far this 12 months, giving the firm a market value of $46.52 billion.

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