Foxconn, lead iPhone assembler, warns shipments will fall by 10 percent due to chip crisis

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Foxconn to build new semiconductor plant in mainland China.
Image: Foxconn

Foxconn, Apple’s main iPhone assembler, recently revealed its shipments would fall by 10 percent because of the global semiconductor shortage.

Chairman and CEO Young Liu commented on the corporation’s electronic components sourcing problems during a recent earnings call.

Liu also expressed his belief the worldwide chip scarcity would continue until 2022.

Even Foxconn is Not Immune to the Chip Crunch

Foxconn’s chief executive explained the corporation experienced no issues securing enough parts to assemble its clients’ devices. Because the company makes products for large firms like Apple, Amazon, and Dell, its suppliers prioritized its orders. But he said the crisis that has waylaid automobile manufacturers across the world caught up with the firm in March.

At present, Liu expects the semiconductor bottleneck to reduce its deliveries by 10 percent. However, he did not offer a timetable regarding the problem’s impact on Foxconn’s operations or which shipments would be affected.

That said, he mentioned supplies for “home economy products,” likely meaning remote work facilitating electronic devices, are especially constrained. He explained COVID-19 prompted a number of rush orders these type of electronics, which strained its part inventories.

The learn and work-from-home trend that began post-pandemic and the unexpectedly rapid recovery of the global vehicle market are two major causes for the chip crunch.

Chip Shortage to Continue Through Q2 2022

Liu told his investors he believes the semiconductor shortage will continue through the second quarter of 2022 based on researchers’ forecasts. Given Foxconn’s market presence, his commentary suggests many consumer electronics will have scattershot availability this year.

In addition, Liu is not the only industry leader to state that the component crisis will extend into next year.

Koh Dong-jin, co-CEO of Samsung, described the semiconductor scarcity as a “serious imbalance” between supply and demand. He also told the company’s shareholders the problem might preclude the launch of a Galaxy Note mobile device in 2021.

Ganesh Moorthy, CEO of Microchip Technology, said the shortage could persist into 2022 because the semiconductor sector could not rapidly adjust to the cycle changes brought about by COVID-19. James Yang, president of Innolux Corp., echoed Moorthy’s sentiments and commented that foundry space tightness would prolong the crisis.

Several market analysts also project that the electronic parts shortfall will not be resolved this year.

Harlan Sur, a J.P. Morgan analyst, predicted chipmakers would need 3-4 quarters to catch up with demand last month. Maribel Lopez, founder of Lopez Research, forecast the disruption affecting the industry would not let up in 2021. Susquehanna Financial analyst Christopher Rolland stated the shortage would worsen this spring as the rollout of coronavirus vaccines precipitates more economies reopening.

Based on currently available data, mid-2022 is the most realistic timeframe for the chip crunch to begin easing up.

But as Intel CEO Pat Gelsinger said, its underlying cause — a lack of cutting-edge fabs — will take a “couple of years” to fix. Large chipmakers with billions of dollars in cash on hand cannot build new factories overnight. Until then, even companies as big as Foxconn will have to deal with the component supply chain’s “new normal” growing pains.

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