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Sunday | May 9, 2021
For Foxconn, the party will be later

For Foxconn, the party will be later

Foxconn is the company that best characterizes the term “workshop of the world”.

For years, this Taiwanese giant has been acting as an assembler for others. We know it today with a very close partnership with Apple for which it manufactures almost all the iPhones. But Foxconn has also assembled the Xbox, it is currently involved in PCs for customers like Dell, HP and many others.

Apple et Foxconn

It must be said that the company’s capabilities are phenomenal. In China, the group can mobilize nearly 1 million people to run its factories. It is illusory to think that Foxconn is only the home of Chinese arms, the company has ultra-modern capabilities and has diversified its business sectors.

foxconn dell

But Foxconn is starting to cough and that is not a good sign.

For Foxconn, the shortage of components will last until the second half of 2022.

It’s quite simple, we often say “when the building goes, everything goes” and well we could almost copy this maxim on Foxconn to get an idea of the consumer electronics market.

Young Liu, president of the company, said at a press conference held on Tuesday, March 30 that: “the supply in the first two months of this quarter was still okay. However, we are starting to have production difficulties. We are running out of semiconductors. Like many players around the world, we are running out of parts.

Under these conditions, Foxconn plans to reduce its shipments by 10% during this year 2021…And that’s the official number. This is a new worrying signal for this heavyweight, which has, with the support of the prestigious brands it serves, more resources andan incomparable bargaining power in the market. The president of Foxconn believes that the crisis is here to stay. For him, the situation could last at least until the second quarter of 2022.

Foxconn Iphone factory

Iphone assembly at Foxconn

Subcontractors want to reverse the pressure

The other issue is the company’s margin and Foxconn like other partners of some major brands want to get rid of the golden handcuffs they have worn for years.

A period of price increases for these companies (including Foxconn) is therefore ahead of us. It comes on top of the explosion of freight costs from Asia. The latter is logically cyclical and should end in the second half of the year. On the other hand, there is no doubt about the former.

Apple is the first to have understood the risk and has been trying to diversify its production chain for some time. But the fact that it is dependent is obvious. For the others, the subject has just exploded in their faces with the health crisis. As far as the final customer is concerned, he is suffering from the situation. Without any short-term alternative, a long period of price increases is to be expected.

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Edited by Calliers

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