Digital and electronic device manufacturers across the world are gearing up for a shortage of components. Game consoles, smart devices, and automobile manufacturers face a tremendous supply chain paucity, affecting their product availability.
Apple supplier Foxconn, the world’s largest contract electronics manufacturer, says the shortage may last till next year based on research reports from analysts. “In the first two months of the first quarter, the impact [of the shortage] was not so palpable, but we are gradually seeing that change,” Young Liu, Foxconn chair, told investors on an earnings call on Tuesday.
Foxconn reported financial results for the fourth quarter of 2020 slightly below expectations. Net profit fell 4 percent to NT$46bn ($1.61bn) from the same period a year earlier, mainly due to the impact of the Taiwan dollar’s steep rise compared to the US dollar. The company’s gross margin fell below its expected 7 percent to 5.69 percent, well below its previous showing of 6.47 percent a year earlier.
Samsung Electronics, one of the world’s largest technology companies, sounded a similar warning about a global shortage of chips just recently. It said there was a “serious imbalance” in global chip demand and supply.
Liu said that since the big brands, to whom it supplies electronic components and chips, had larger order volumes they would still be better positioned than the smaller companies. He added that Foxconn would not be able to fulfill less than 10 percent of its orders because of the component shortage.
“His comments are interesting because previously some PC companies suggested that the situation may be improving, but he appears to say the opposite,” said Patrick Chen, head of Taiwan research at CLSA, a brokerage.
According to Chen, the components suffering a huge shortfall include analogue integrated circuits (ICs), used in displays.
Foxconn said it was “cautiously optimistic” about the company’s performance this year as demand in all of its product segments has been strong in the first quarter, with consumer electronics outpacing earlier expectations.
Liu, in his earnings call, said that Foxconn will be able to achieve its gross margin target as long as the pandemic fades away and there is no resurgence of the disease, affecting its supply line.
Foxconn has shifted some of its manufacturing away from China to Vietnam and India. Foxconn already has plans to invest up to $1 billion in setting up an iPhone assembly plant in India. Foxconn is planning a $270 million investment in Vietnam to expand its manufacturing capacity, according to a report in Nikkei. The Taiwanese company plans to move more than 30 percent of its production lines outside China. Foxconn is setting up a new subsidiary called FuKang Technology Co Ltd – a move aimed at supporting the Vietnam expansion.
Television sets will also be manufactured at the Vietnam plant for clients, including Japan’s Sony Corp, with the beginning of production slated for late 2020 to early 2021. The factory will also make other electronic products such as computer keyboards.
