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Apple Supplier Foxconn Plans to Rely Less on China for Revenue

TAIPEIFoxconn Technology Group, one of Apple's AAPL 0.83%increase; green up pointing triangle biggest suppliers, said it would rely less on China as a source of revenue as it diversifies production sites to strengthen supply-chain resilience.

About 70% of Foxconn's revenue comes from China, said Young Liu, the company's chairman. Going forward, the proportion coming from markets outside of China will continue to grow, he said in an earnings call Wednesday. Foxconn's revenue in 2022 was 6.6 trillion New Taiwan dollars, equivalent to around $215 billion.

"It is a basic truth that labor-intensive industries transfer to low [gross domestic product] countries," Mr. Liu said. These economies grow with the development of the labor-intensive industries, which in turn triggers another round of transfers, he said, referring to the past migration of such production from the U.S. to Japan, then to Taiwan, then to mainland China.

"These high GDP countries must upgrade their industries in order to support the sustainable development of a high GDP society," he said.

Taiwan-based Foxconn, best known for assembling Apple Inc.'s iPhones and other products in big plants in mainland China, has been diversifying its production sites as well as the products it manufactures.

Foxconn is considering a big expansion in India, including possibly assembling millions more iPhones and setting up new factory sites, The Wall Street Journal has reported. It has also been expanding in countries including Vietnam, Mexico and the U.S.

Apple has been pushing suppliers to diversify beyond China after many of them experienced multiple production disruptions during Covid-19 lockdowns in the country.

Late last year, protests erupted at Foxconn's iPhone plant in Zhengzhou, central China, as frustration grew among workers over tight pandemic control policies and wages. With output having returned to normal levels at the Zhengzhou site, Foxconn's smart consumer electronics business, which includes smartphones, is expected to grow in the first quarter from the same period a year earlier, Mr. Liu said.

In the October-December period, Foxconn's net profit dropped 10% from a year earlier to NT$40 billion, or about $1.3 billion. Revenue for the quarter increased 4%.

The company, formally known as Hon Hai Precision Industry Co., has also been investing to expand its automotive and semiconductor businesses.

Foxconn also said Wednesday in a stock exchange filing that its subsidiary has received 5.4 billion yuan, or about $780 million, from Chinese firm Yantai Haixiu IC Industry Investment Center to which Foxconn sold its stake in Chinese chip maker Tsinghua Unigroup.

The deal had come under scrutiny in Taiwan, the world's biggest chip-production hub, and one that is wary of China's technological advancement in the sector.

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