Last month, revenue at Hon Hai experienced a significant rise of 25.5%.
Foxconn, the primary contract manufacturer for tech giants like Apple and Nvidia, reported a 25.5% revenue surge in May. This growth might be attributed to the rush of orders dreading U.S. tariffs, which could disrupt the business landscape for these tech companies.
The Taiwanese conglomerate, also known as Hon Hai Precision Industry Co, announced consolidated sales of NT$641.37 billion (nearly $21.28 billion USD), up from NT$510.9 billion in the same period last year. This growth propelled Hon Hai to reach their highest ever accumulated revenue for the initial four months of the year, totaling NT$2.28 trillion.
The company noted a "strong pull-in momentum" for AI products as a significant factor in their revenue growth. This surge came after Q1, during which Apple, along with PC manufacturers like Lenovo, accelerated shipments to the U.S. and other markets to build inventory reserves.
However, even with these precautions, Hon Hai's clientele is anticipated to suffer from U.S. tariffs on Chinese imports and elsewhere. Last week, Apple forewarned of an additional $900 million in expenses from tariffs for the current period.
Foxconn predicts that this quarter will witness growth both quarterly and year-on-year, with evolving global political and economic conditions requiring vigilant monitoring. They are set to reveal their Q1 earnings report and call next Wednesday.
In a related development, Largan Precision Co, a smartphone camera lens supplier, reported a 26.53% revenue boost in May. Their cumulative sales for the first four months amounted to NT$18.95 billion, signifying a 28.32% increase year-on-year. The company experienced continuous monthly revenue growth for the fifth consecutive month.
The hexagonal dip in June's sales momentum is forecasted due to a slower shipment pace this month compared to May. Additionally, the strengthening of the New Taiwan dollar against the US dollar is projected to pose a challenge for Largan's operations, but the company did not offer further elaboration on this topic.
In the broader context, U.S. tariffs pose challenges for electronics manufacturers like Foxconn and Largan Precision Co. While these tariffs may initially lead to short-term revenue growth due to expedited deliveries, they could result in increased costs, supply chain disruptions, and long-term fluctuations in revenue and profitability. As a coping strategy, manufacturers in this sector are increasingly likely to explore diversifying their manufacturing locations and sourcing strategies to minimize the impact of trade tensions.
The financial growth of Hon Hai Precision Industry Co (Foxconn) in Q1, primarily due to a "strong pull-in momentum" for AI products, was complemented by a 26.53% revenue increase in Largan Precision Co, a smartphone camera lens supplier. Additionally, the looming U.S. tariffs could have various implications for both companies, such as increased costs, supply chain disruptions, and potential long-term fluctuations in revenue and profitability. In response, manufacturers in the technology industry, like Foxconn and Largan Precision, might seek to diversify their manufacturing locations and sourcing strategies to alleviate the effects of trade tensions.
