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The global shortage of electronic components is worsening and is expected to last until next year, Apple supplier Foxconn said, suggesting that the global carmakers’ shortfall is starting to be felt by big tech brands.
“During the first two months of the first quarter, the impact [of the shortage] was not that palpable, but we are gradually seeing this change, ”Young Liu, chairman of Foxconn, told investors on a call for results on Tuesday. He added that the shortage would persist until 2022, citing research reports from analysts.
Foxconn, which is listed on the Taiwan Stock Exchange as Hon Hai Precision Industry, is the world’s largest contract electronics manufacturer. The fact that it assembles electronic gadgets and manufactures components for all of the world’s major tech brands makes it an indicator of consumer electronics manufacturing trends.
Its assessment follows a warning from Samsung Electronics, one of the world’s largest technology companies, of a “serious imbalance” between global supply and demand for chips two weeks ago.
Liu said that since Foxconn’s customers were among the top companies in the electronics industry with the highest order volumes, they suffered less from the shortage than some smaller peers. Foxconn would not be able to fill less than 10% of its orders due to the component shortage, he said.
“His comments are interesting because previously some PC companies suggested things could get better, but he seems to be saying the opposite,” said Patrick Chen, head of Taiwan research at CLSA, a brokerage firm. Chen added that the components most affected by the shortage included analog integrated circuits (ICs), including those for display drivers and power management. The screens themselves, especially for laptops, have also been affected.
Foxconn’s remarks come as the company reported financial results slightly below investor expectations for the fourth quarter of 2020. Net profit fell 4% to NT $ 46 billion ($ 1.61 billion) per compared to the same period a year earlier, mainly due to the impact of Taiwan’s sharp rise in the dollar against its US counterpart, Foxconn said. The company’s gross margin slipped to 5.69% from 6.47% a year earlier and is moving away from the company’s target of 7%.
Foxconn said it was “cautiously optimistic” about the company’s performance this year as demand across all of its product segments was strong in the first quarter, with consumer electronics exceeding previous expectations. As long as there is no further disruption from the coronavirus pandemic and there is no severe cut in the component shortage, Foxconn could still meet its gross margin target, Liu said.
He added that his optimism stemmed from Foxconn’s early preparations to move some of the manufacturing out of China. According to Liu, China’s share of overall Foxconn production increased last year to more than 75%, as the country’s success in controlling the pandemic resulted in a faster return to stable manufacturing conditions than elsewhere. However, Foxconn expects more capacity to move away from China once the situation with Covid-19 improves in other countries.
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