Foxconn Forecast Portends More Bad News for Apple

(Bloomberg Opinion) -- Foxconn Technology Group just painted a bleak picture for the June quarter, and the implications for its largest client aren’t good.

While overall revenue at Foxconn’s Hon Hai Precision Industry Co. will drop a moderate “single digit” percent, that decline is softened by pandemic-driven demand for enterprise and computing products.

Hon Hai’s consumer products division, which includes the millions of iPhones it churns out for Apple Inc. each quarter, will fall at least 15% from a year earlier, the Taipei-based company told investors late Friday. That’s even worse than the 14% drop experienced in the March quarter. By comparison, Apple posted a 7.2% drop in revenue from iPhones and iPads combined.

While Apple is Hon Hai’s largest customer, at around half of revenue, it’s not the only one. Other consumer products manufactured by the Taiwanese company include game consoles and accessories.

Where Foxconn can take solace is in the booming demand for servers, PCs, networking equipment, data centers and other enterprise products. Its computing division will post revenue growth of at least 15% this quarter, which is nice but accounts for only 21% of revenue. Enterprise sales will climb more than 10% but make up only 24% of total revenue.

For years, Foxconn enjoyed the benefits of riding the iPhone wave, the most successful technology product of this generation. Now its dependence on consumer electronics, at 50% of sales, is proving to be its greatest weakness.

“The last part of March and the first part of April were very depressed, and then we’ve seen a pickup relative to that period of time in the second half of April,” Apple CEO Tim Cook told Bloomberg News two weeks ago. The company this month declined to provide a forecast for the first time in at least a decade.

Foxconn’s outlook provides a glimpse into a future that Apple dare not predict. And it’s not a pretty sight.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

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