Apple supplier Foxconn forecast an up to 3% fall in revenue for the year in what could be its first annual sales decline in six years, driven by chip shortage and dampened demand by the COVID-19 pandemic.

The biggest contract electronics manufacturer globally expects that revenue for the first quarter and the full year will be between a 3% drop and a 3% increase.

According to Reuters, Chairman Liu Young-way projected on Wednesday, March 16, that 2022 would be a “challenging year.”

He said, “The pandemic has not eased, inflation is high and global politics are getting tense – these all further complicate supply and demand and lead to great uncertainty to our outlook.”

He, however, noted that the revenue bonanza from soaring electronics demand following the pandemic last year would lead to “stable” performance this year. Analysts believed Foxconn could still record a revenue increase of 1.2% this year.

Liu said Foxconn might see some prospects in sales from other sectors such as 5G smartphones and cloud services. But there might still be a stagnation in smartphone revenue this year.

The Russian invasion of Ukraine has also prompted Apple to halt all product sales in Russia.

Meanwhile, Liu said the risks of the supply chain issue for Foxconn would be clear until the second half of this year.

Due to the COVID-19 outbreak, Foxconn’s plant in the Shenzhen province of China had to suspend operations earlier this week following Beijing’s directions of pandemic control. But the factory resumed work after following the government’s condition that their staff remains in a bubble to prevent airborne disease Wednesday.

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