BEIJING, January 5 (TMTPost)— Hon Hai Technology Group (Foxconn), the world’s biggest iPhone maker, seems to brace further business weakening amid increasing concerns about iPhone sales.

Credit：TMTPost

According to unaudited results released on Friday, Foxconn revenue in the fourth quarter of 2023 plunged 5.4% year-over-year (YoY) to NT$1.85 trillion (US$59.7 billion), compared with a record high revenue a year earlier, when its facilities resumed normal operations from the Covid-19 pandemic. The YoY dip was due to weak or flattish sales in smartphone and other smart consumer electronics products, components and other products,computing products, cloud and networking products. The decline accelerated as revenue in December dropped 26.89% YoY to NT$460,125, representing the biggest decrease in the year. The previous month saw a YoY increase of 17.95%.

Foxconn also flagged another quarter decline in sales in the first quarter of this year. It said the current quarter is expected to be similarly slow to the same period of the previous three years, though revenue will experience a YoY decrease, which suggested a fourth straight quarterly fall. The company is scheduled to report earnings in the quarter ended December on March 14 and update its outlook.

While Foxconn didn’t give numerical guidance, the preliminary forecast highlighted worries about sluggish sales outlook of its key customer Apple Inc. Apple stock was downgraded twice earlier this week, pointing to softening iPhone sales.

Barclays cut its ratings on Apple to underweight for the first time since 2019. “We are still picking up weakness on iPhone volumes and mix, as well as a lack of bounce-back in Macs, iPads and wearables,” Barclays analysts wrote in a note to investors Tuesday. Their price target was slightly cut by US$1.00 to US$160, representing an around 17% stock plummet for the tech giant from the previous trading day. The biggest takeaway from Barclays’ latest checks is incrementally worse iPhone 15 data points out of China, together with developed markets remaining soft, according to the note. Another Wall Street firm, Piper Sandler, also trimmed rating on Apple, down from overweight to neutral, citing valuation concerns and a tough outlook for the mobile market. “We are concerned about handset inventories entering into 1H24 and also feel that growth rates have peaked for unit sales,” wrote Piper Sandler analyst Harsh Kumar in a note Thursday.

Foxconn also faced regulatory headwinds in mainland China, in which its major production bases are located. The tax authorities on mainland have conducted tax audits of key subsidiaries of Foxconn Group in Guangdong, Jiangsu, and other provinces, and the natural resources authorities have conducted on-site examinations of the land use of Foxconn's factories in Henan, Hubei, and other provinces, the state-backed newspaper Global Times reported in October. The audits and examinations were a normal administrative action in accordance with the law, the report quoted Zhang Wensheng, deputy dean of the Taiwan Research Institute of Xiamen University. Foxconn's subsidiaries have an obligation to actively cooperate with inspections and investigations. If there are illegal and irregular activities, they should admit their mistakes, accept punishment and quickly correct them.

Legal compliance is a basic principle of our group for operations across the world, and the group will actively cooperate with the relevant units on the related work and operations, a Foxconn statement in response to the report.

 “While sharing the growth dividends on mainland China and achieving rapid development, Taiwan-based companies should also assume corresponding social responsibilities and play a positive role in promoting the peaceful development of relations across the Taiwan Strait”, Zhu Fenglian, a spokesperson of the Taiwan Affairs Office (TAO) under the State Council, commented on the Democratic Progressive Party-ruled local authorities’ calling China’s reported probe into Foxconn a political practice.

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