Major iPhone assembler Hon Hai Precision Industry Co (鴻海精密) yesterday said revenue this year is expected to remain flat from last year due to lingering component shortages and a higher comparison base.
This year would be challenging for the company, as COVID-19 flare-ups around the world, high inflation and escalating geopolitical conflicts are expected to reduce consumers’ purchasing power, Hon Hai said.
The Russia-Ukraine war has not caused significant disruptions in component supplies, but it has led to an increase in energy and commodity prices, and manufacturing costs, as well as inflationary pressures, it said.
Photo: Screen grab from the Internet
Higher manufacturing costs are likely to reduce Hon Hai’s gross margin this year from last year’s 6.03 percent, Hon Hai chairman Young Liu (劉揚偉) told an online investors’ conference yesterday.
“I am cautiously optimistic about this year’s outlook. We expect a stable performance for the whole of this year,” Liu said.
The smart consumer electronics business, the biggest revenue source for Hon Hai, is to see revenue little changed mostly due to a higher base last year, Liu said.
Global shipments of 5G smartphones are still rising this year, he said.
The cloud and networking products and components segments would enjoy significant growth this year, thanks to increasing demand for 5G-enabled networking devices and market share gains, Liu said.
The company reported that revenue last year expanded at a faster-than-expected rate of 12 percent to NT$5.99 trillion (US$209 billion), from NT$5.36 trillion in 2020.
Net profit surged 37 percent to NT$139.32 billion, from NT$101.8 billion in 2020, marking the best performance in about 14 years. Earnings per share jumped to NT$10.05, from NT$7.34 a year earlier.
Hon Hai said this quarter would be the strongest first quarter in about a decade, aided by orders relayed from the prior quarter, as insufficient supply of key components hindered shipments.
Revenue this quarter would be flat from the NT$1.35 trillion in the first quarter last year, Liu said.
“We did not see any slowdown in demand because of key component shortages or inflation,” he said.
Addressing investors’ questions about Hon Hai’s progress in electric vehicle development, Liu said the company is to make electric trucks for Lordstown Motor Corp at its Ohio factory from the second half of this year.
The company’s Model C electric vehicle is to enter production next year at its local factory, Liu said.
To accelerate commercial production of electric vehicles, Hon Hai is expanding its global manufacturing footprint via the business model of build-operate-localize, Liu said.
Aside from North America and Taiwan, Hon Hai has formed manufacturing partnerships in Thailand, Indonesia, India, the Middle East and Mexico, he said.
He expects the new electric vehicle business to yield a marked contribution next year.
Hon Hai aims to seize 5 percent of the world’s electric vehicle market by 2025 by shipping 500,000 to 750,000 units, Liu said.
To support the company’s global capacity expansion and new businesses, Hon Hai plans to increase capital expenditure this year, from NT$92.3 billion last year.
Separately, Hon Hai said it has begun restoring production at its Shenzhen, China, campuses by applying a closed-off management process.
This process, which can only be done on campuses that have employee housing and production facilities, adheres to strict industry guidelines and close-loop management policies issued by the Shenzhen City Government, Hon Hai said in a statement.
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