iPhone Producer Foxconn Forecasts Weakening Device Demand

Apple’s chief iPhone supplier will increase investments outside of China as consumer electronic demand weakens.

Foxconn, the world’s largest contract electronics manufacturer, released earnings Wednesday (Mar. 15) that projected flat revenue for the first quarter and full year, with lower demand for consumer electronics offset by other areas of its business.

“We maintain a relatively conservative view towards the smart consumer electronics and think they might decline slightly,” Liu Young-way, the company’s chairman, said on an earnings call.

While 70% of Foxconn’s revenue comes from products it makes in China, the company now says its overseas operations will increase. 

Foxconn, which assembles nearly three-quarters of Apple’s flagship product, has been moving into new sectors outside of China after COVID restrictions hampered production in 2022.

The company has reportedly weighed a major expansion in India, including the possibility of shifting some of its iPhone production operations to that country. It is also begun expanding in other countries, the U.S. and Mexico among them.

Apple had previously predicted a drop in demand for iPhones when it released quarterly earnings last month.

It’s in keeping with projections earlier this year from the research firm Gartner, which forecast a decline in sales of smartphones and PCs. In the case of smartphones, the report showed a 4% drop in sales from 1.28 billion units in 2022 to 1.23 billion this year.

“Consumers are holding onto their phones longer than expected, from six to 9 months, and moving away from fixed to flexible contracts in the absence of meaningful new technology,” said Ranjit Atwal, senior director analyst at Gartner. “In addition, vendors are passing on inflationary component costs to users, which is dampening demand further.”

Research by PYMNTS and LendingClub has found that necessities such as rent and mortgage, food, fuel and utilities are overtaking household earnings, with consumers increasingly living paycheck to paycheck.

That means consumers are rethinking purchasing new versions of the big-ticket discretionary items they considered last year, according to “New Reality Check: The Paycheck-to-Paycheck Report: The Economic Outlook and Sentiment Edition.”

“With inflationary pressures dampening their optimism, many consumers are likely to shy away from large purchases in 2023, primarily electronics, appliances, and leisure travel,” the study said. “Only 35% of consumers said they will incur leisure travel expenses in 2023, and just 24% plan to purchase expensive electronics or appliances in 2023.”