Taiwan’s Foxconn, the largest assembler of Apple’s iPhones and a global leader in contract electronics manufacturing, foresees a marginally better business performance in 2024 compared to the previous year. However, the company faces a hurdle due to a shortage of chips crucial for artificial intelligence (AI) servers.
Foxconn’s 2023 performance and the Sharp Corp setback
Chairman Liu Young-way acknowledged the company’s overall positive performance in 2023, despite a significant write-off in the first quarter related to its 34% stake in Japanese electronics maker Sharp Corp. This acknowledgment highlights the resilience of Foxconn in navigating challenges and maintaining stability.
Outlook for 2024: slight improvement amidst chip shortage
Expressing optimism about the year ahead, Liu stated that Foxconn’s outlook for 2024 could be “slightly better” than the previous year. This positive sentiment aligns with the company’s relatively conservative and neutral outlook declared in November 2023. However, the anticipated improvement comes with a caveat—Foxconn confronts a shortage of chips crucial for AI servers.
AI server demand vs. global economic uncertainty
Liu noted that the demand for AI servers remains robust, driven by the increasing reliance on artificial intelligence technologies. However, he also highlighted a potential challenge arising from global economic uncertainty, exacerbated by geopolitical issues. This uncertainty is expected to impact consumer product demand, presenting a mixed scenario for Foxconn across different market segments.
Apple’s impact and challenges in the key Asian market
The announcement by Apple forecasting a decline in iPhone sales and a revenue shortfall of $6 billion below Wall Street expectations has implications for Foxconn. Liu acknowledged that while demand for AI servers is strong, challenges arise from geopolitical problems affecting consumer product demand. The situation poses a nuanced scenario where certain market segments show promise, while others face uncertainties.
Global chip shortage and production challenges
Liu shed light on the limited production capacity for chips crucial for servers, even in the face of robust demand. Addressing the challenges posed by the global chip shortage, he suggested that the industry may need new factories to keep up with demand. This observation underscores the wider industry issue of semiconductor supply chain constraints affecting various players.
Foxconn’s fourth quarter earnings and future updates
Foxconn is set to report its fourth-quarter earnings next month, providing a comprehensive view of its financial performance. The company is expected to update its outlook for 2024 during this announcement. Additionally, January sales data, set to be released soon, will offer insights into Foxconn’s early performance in the current year.
Market response and stock performance
Foxconn’s shares have experienced a modest decline of 2.4% in the early part of the year, contrasting with a 0.7% gain in the broader market. The market response indicates a cautious sentiment among investors, possibly influenced by the ongoing uncertainties in the semiconductor industry.
Foxconn’s outlook for 2024 is characterised by cautious optimism, a chip shortage challenge, and the broader impact of geopolitical and economic uncertainties. As the company navigates these dynamics, the global chip shortage remains a significant factor influencing its performance and the wider electronics manufacturing landscape.