Foxconn, a key supplier to Apple, may see sales fall this quarter on slowing demand and supply issues and China’s zero-Covid policy. Enough to jeopardize the iPhone 14.
The Foxconn factory, a key subcontractor for Apple, has just warned that its earnings could fall this quarter. It’s about slowing demand, growing supply problems, the Chinese government’s zero-Covid policy, and more generally geopolitics and US-China relations. However, last February the factory said it was optimistic about component shortages.
While the factory has been working with Apple for many years and is very important in the iPhone manufacturing chain, we may wonder about the release of the future iPhone 14. Will the phones be ready for release or will there be shortages?
Foxconn in trouble, like the rest of the electronics market
The company, officially named Hon Hai Precision Industry, says its electronics business earnings may decline this quarter. She cites several reasons for this: slowing growth due to rising inflation, stagnating demand, but also problems in the supply chain, which she explains with blockages in China.
In fact, Foxconn, like all other global manufacturers, faces a serious shortage of chips, which inevitably affects the production of smartphones. Consequently, the main customer Apple is also affected.
Apple’s prime contractor wants to reduce its dependency
We learn that Foxconn is currently trying to reduce its dependence on the production of smartphones and consumer electronics in general. That now accounts for more than half of its revenue, but the company wants to diversify, particularly in electric vehicle manufacturing. Foxconn estimates that the market will reach $34 billion by 2025.
Hon Hai Precision Industry therefore recently invested US$9 billion in a factory project in Saudi Arabia. According to data from Wall Street Journal“The Saudi government is considering an offer from the company […] to set up a two-line foundry for surface mount technology and wafer production […] Discussions on the project began last year.“.
In this report from the American newspaper, we are told that the company is looking to diversify.against a backdrop of rising tensions between China and the United States, putting China in a potentially vulnerable situation“.
What implications for the iPhone 14?
A few days ago, hundreds of workers who work the MacBook Pro assembly line rebelled against Chinese government regulations by fleeing the factory where they were imprisoned.
Though Apple tried to forestall China’s zero-Covid-policy lockdowns, including asking Foxconn to hire assembly workers earlier than usual, it did so too late. The problem is that Foxconn produces 60% to 80% of the iPhones marketed; The lockdown is a big problem for the Apple brand if they want to release the iPhone 14 on time.
If nothing has been confirmed by Apple, we must expect a delay in production and therefore a delay in the delivery of future models. This could result in the keynote announcing the next iPhones being backtracked or even running out. Inflation-related price increases are also to be expected. Remember that back in 2020 Apple had to delay the release of its iPhone 12, 12 mini, 12 Pro and 12 Pro Max due to the pandemic and shortage.
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