What’s going on?

Foxconn (Taiwanese electronics giant) released a surprising pleasant quarterly yoy growth of 30% yoy, while reducing future sales forcast.

What does this mean?

• Foxconn is the world’s largest manufacturer of electronic equipment for other companies, including iPhones for Apple. Strong demand for smartphones and other consumer gadgets helped its profit surge beyond expectations, setting a new 2Q record.
• Most of the firm’s factories are located in Asia, which is seeing rapidly rising coronavirus cases. This is expected to lead to supply chain disruptions. That, along with the ongoing global chip shortage, makes Foxconn reckon that consumer electronics manufacturing revenue will be slightly lower yoy in 3Q.

Why should I care?

The bigger picture: Happiness is homemade

• The semiconductor shortage is pushing Foxconn to invest in its own microchip production capability. For example, it has invested in several Asian chipmakers and bought a factory from Macronix (fellow Taiwanese firm). This own-brand semiconductor business is expected to generate $2b in annual sales by 2025.
• It plans to use these home-made chips to supply its emerging electric vehicle-building business.

Zooming out: Another Asian company and China’s internet industry

• Another Asian company – Baidu (Chinese internet search giant) also saw its 2Q revenue climb 20% yoy, despite still making loss after marking down its investment value in Kuaishou (video-sharing platform).
• Shares of Kuaishou sank 28% last quarter after China took severe measures against its internet industry, beyond ecommerce and anticompetitive practices, to cover data security and streaming content.

Content source: Finimize (2021) For Foxconn’s Sake. Available at: https://www.finimize.com/wp/news/for-foxconns-sake/ [Accessed on Aug 13, 2021]