Apple Supplier Foxconn Revenue Drops By 12% In December

Taiwan’s Foxconn the world’s largest contract electronics maker, said on Thursday that output at its iPhone plant in China had “basically returned to normal” and December revenue, down 12.3% year-on-year, marked the start of a recovery.

Production of Apple iPhones faced disruption ahead of Christmas and January’s Lunar New Year holidays, after curbs to control COVID-19 prompted thousands of workers to leave Foxconn’s factory lines in China’s Zhengzhou city.

Although lower compared with the previous year, the company said revenue for December was better than it expected and that a “gradual recovery” at its Zhengzhou plant had contributed to “double-digit growth” in revenue for its smart consumer electronics business compared to November.

A Foxconn source familiar with the matter, who could not be named because they were not authorized to speak to the press, said the growth in December compared to the month prior for its consumer electronics business, including smartphones, showed major client Apple did not cut orders.

A high base from a year earlier, when demand for smartphones revived after the early impact of the pandemic, also led to the yearly decline in revenue, the person added. Revenue for 2022 rose 10.47% from the previous year to a record high, driven by growth across major product lines from smartphones to servers, the company said.

In the fourth quarter, the Zhengzhou plant grappled with strict COVID-19 restrictions, now being eased, that fuelled discontent among workers over conditions at the factory. It was also hit by worker unrest over pay. In the fourth quarter of 2022, the Zhengzhou plant grappled with strict COVID-19 restrictions that fueled discontent among workers over conditions at the factory.

Production of the Apple device was disrupted ahead of Christmas and January’s Lunar New Year holidays, after a COVID-19 outbreak and curbs taken to control the virus prompted thousands of workers to leave. It was also hit by a bout of worker unrest over payment issues.

Foxconn has been offering bonuses to attract new workers and convince those still there to stay on. A company source told Reuters last month that it was aiming for the plant to resume full production around late December to early January. Foxconn shares closed down 0.1%, below the broader market which ended up 0.72%.

Analysts say Foxconn assembles around 70% of iPhones, and the Zhengzhou plant produces the majority of its premium models including the iPhone 14 Pro. The company said in Thursday’s statement it expects first-quarter revenue “to be roughly in line with market consensus,” without elaborating. Analysts expect first-quarter revenue to grow by 5.6% year-on-year, according to Refinitiv.

Foxconn expects the plant to resume full production between late December and early January, Chinese news site Ifeng.com reported yesterday, citing a source familiar with the firm. “The overall epidemic situation has been brought under control,” Foxconn said.

Foxconn’s revenue from smart consumer electronics was hit hardest last month, falling as output entered the off-peak season, and some shipments were impacted by Covid-19. Income from computing products had double-digit growth from a year ago due to new device launches and better component supply. Cloud and networking product revenue rose on strong server demand.

In the 11 months that ended Nov. 30, Foxconn’s revenue rose 13.6 percent to a record high of nearly TWD6 trillion from the same period last year.