Daily Brief: Foxconn Is Making More Money, But Rising Coronavirus Cases In Asia Could Quickly Change That

Daily Brief: Foxconn Is Making More Money, But Rising Coronavirus Cases In Asia Could Quickly Change That

over 2 years ago3 mins

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Taiwanese electronics giant Foxconn released a pleasantly surprising set of quarterly results on Thursday, while simultaneously flagging a less sunny forecast for future sales.

What does this mean?

Foxconn – the world’s largest manufacturer of electronic equipment for other companies, including iPhones for Apple – saw its earnings grow 30% last quarter compared to the same time last year. Strong demand for smartphones and other consumer gadgets helped profit surge past both the company’s and its investors’ expectations, setting a new second-quarter record.

But Foxconn warned that rapidly rising coronavirus cases in Asia – where most of the firm’s factories are located – are likely to lead to supply chain disruptions. Add in the impact of the ongoing global chip shortage, and the company reckons that revenue from consumer electronics manufacturing will come in slightly lower this quarter than it did the last.

Rising cases

Why should I care?

The bigger picture: If you can’t buy ‘em, make ‘em.

The semiconductor shortage is pushing Foxconn to invest in its own microchip production capability, which the company plans to use to supply its fledgling electric vehicle-building business. Foxconn has invested in several Asian chipmakers in recent months, as well as buying a factory from fellow Taiwanese firm Macronix – and the company says its own-brand semiconductor business should generate $2 billion in annual sales by 2025.

Zooming out: Baidu? Google it.

Foxconn wasn’t the only Asian heavyweight reporting results on Thursday. Chinese internet search giant Baidu saw its second-quarter revenue climb 20% from a year earlier – but the company still made a loss after marking down the value of its investment in Kuaishou. Shares of the video-sharing platform sank 28% last quarter after China’s crackdown on its internet industry expanded beyond ecommerce and anticompetitive practices to cover data security and streaming content.

Baidu slides

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The UK Economy Carried On, Growing 4.8% In The Second Quarter

UK image

The British economy grew 4.8% in the second quarter, according to official data out Thursday – but while the country did better than its neighbors, one national institution was not amused.

What does this mean?

Britain’s economy ended June 1% bigger than it was at the beginning of the month. That growth was greater than expected, thanks to consumers splashing the cash as many pandemic-related restrictions came to an end. Overall, the UK economy expanded 4.8% in the second quarter of 2021 compared to the first – in line with expectations, but slightly below the 5% the Bank of England had hoped for.

Still, stiff upper lip. The country’s economy is now just 2.2% smaller than in February 2020, shortly before lockdowns kicked in, and it’s expected to close that gap by the end of the year. Assuming nothing derails the recovery, that is: Britain, like much of the world, continues to contend with supply chain issues, staff shortages, and ever more coronavirus cases.

UK GDP

Why should I care?

For markets: Hammer and tongs.

The UK’s second-quarter growth rate still smashed past other large European economies like France, Germany, and Spain. A stronger economy typically translates to a stronger currency – which may help explain why the British pound is currently hovering at its highest level relative to the euro in 18 months. Then again, the UK’s central bank is also laying the foundations for a gradual return to higher interest rates. The prospect of higher returns similarly makes the country’s currency more attractive to international investors.

Pound euro

Zooming out: Britannia rules the booze cruise.

Dufry, Europe’s largest duty-free retailer, has seen some sales of liquor and tobacco double in recent days. British holidaymakers finally able to fly overseas for some late summer sun have been stocking up on alcohol and cigarettes: the UK’s exit from the European Union means they can now bring greater quantities back in without paying taxes.

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