Despite a dip in the previous quarter that fell short of market expectations, the world’s largest contract electronics maker and Apple’s primary iPhone assembler, Foxconn, rebounded with significant growth in its second quarter. This resurgence underscores the enduring demand for smartphones, gaming consoles, and other electronics, which have become essential tools for remote work, home-schooling, and other online activities.
The strong showing also underscores the resilience of the global economy, which has emerged from a period of volatility marked by a slowdown in China and trade tensions with the United States that dampened consumer goods spending. Taiwan’s Foxconn, known as Hon Hai Technology Group in mainland China and Foxconn internationally, operates factories in a dozen countries. Despite the challenges, the vast majority of its revenue is generated in China, where the company has navigated through years of strict zero-Covid policies and other industrial unrest.
Amid the outbreak of the coronavirus pandemic, workers at a Foxconn factory in Henan province rioted and clashed with security guards in November as they tried to break out of their quarantine rooms to shop for necessities. In the ensuing chaos, security forces fired tear gas at the workers, who later staged protests against their living conditions. Some workers threw their phones out of windows and burned their uniforms.
After the crisis, Foxconn offered to pay workers 10,000 yuan ($1,400) to quit and leave the factory. The move was aimed at defusing the crisis and drawing attention to the precarious lives of workers who increasingly make their livings on a gig-like basis, with many employers offering them only the minimum wage. It was the latest episode in a series of upheavals that have highlighted the difficulties faced by Chinese manufacturing employees and heightened reputational risks for Apple, which is highly dependent on its China supplier to produce the bulk of its top-selling product.
As part of its recovery strategy, Foxconn has made significant strides in enhancing employee welfare and pay. These efforts include raising the amount paid for overtime, reducing worker-to-supervisor ratios, and a renewed focus on productivity. This commitment to its workforce underscores the company’s recognition of its pivotal role in its operations and success.
Despite a rosy outlook for the second half of 2023, Foxconn expects its critical consumer electronics revenues to decline from a year ago. That is partly due to a decline in smartphone prices, accounting for more than half of Foxconn’s overall sales.
Looking ahead, Foxconn anticipates higher sales from strategic areas such as artificial intelligence servers, a category that includes GPU chips that were once popular among gamers but have now become crucial for the complex processing required in the emerging field of accelerated computing. The sector is led by Nvidia (NVDA.O), founded by Taiwanese-American Jensen Huang, and whose market value surpassed $1 trillion on Tuesday. The company also expects increased sales from its e-commerce platforms and cloud services. This shift in focus aligns with the forecast of flat overall revenue for the entire year, which was previously communicated. It attributed this to tightening monetary policy, tense geopolitics, and a general economic downturn.
