Foxconn, a leading electronics manufacturer, and major iPhone supplier has released its earnings report for 2020 Q2 ended in June. The report reflects that the manufacturer experienced a 15 percent decline in smartphone sales, globally, due to prevailing COVID-19 pandemic.
However, the company did see a 34 percent growth in its year to year revenue with $778.54 million in net profit from server and computing businesses. The decline in smartphones’ demand due to lower consumer spendings and preference of big screens in the coronavirus pandemic has resulted in a more than 15% dip in revenue from its key consumer product, smartphones.
COVID-19 pandemic’s Impact on Foxconn
In May, the manufacturer forecasted an “enormous” impact on smartphone demand due to on-going global health crises. Even in the third quarter, the company expects to experience an overall double-digit yearly decline and up to 10% decline in consumer electronics from a year earlier. Foxconn’s chairman, Liu Young-way said,
“For consumer electronic products, because everyone is staying at home, naturally it affects consumers’ purchasing power and such power might take a very long time to recover.”
Although the demand is low in the US, it is anticipated that the demand for 5G smartphones in the Chinese market would make up for the losses. Recently, a report revealed that iPhone sales grew by 32% in China in Q2 and Huawei’s 5G smartphones captured 60% of the market share.
Therefore, some tech analysts believe that the upcoming iPhone 12 series will be a growth driver. Taipei-based KGI Securities claim that Foxconn is likely to assemble more than 70 percent of new iPhone 12 models which will result in revenue growth in Q4 when those new smartphones will be available for retail.
Having said that, there is another threat looming over the future of the tech industry, US, and China’s bitter political relations. Currently, American President Donald Trump is in the process of banning two major Chinese social media apps from the United States, TikTok, and WeChat. President is also making it harder for tech companies to continue operations in China by imposing harsher tariffs and trade restrictions.
Expressing concerns over the sore relations between the two superpowers, Liu said “the world factory no longer exists” and “in the future” the ration of the company’s 30 percent of products made outside China is likely to increase.