• Full year 2022 outlook unchanged at “growth”
• Net profit in 3Q and January-September 2022 are records for same periods
• Capex to be higher in 2023 vs 2022
• 2023 outlook for ICT is neutral
• 2023 will be important year for Group in EV business

10 November 2022, Taipei, Taiwan – Hon Hai Technology Group (“Foxconn”) (TWSE:2317) today announced its third quarter and January-September 2022 financial results.

In the July-September quarter, consolidated revenue and net profit attributable to the parent company reached NT$1.7466 trillion and NT$38.8 billion, respectively. Both were record highs for any third quarter. For the first three quarters of this year, the combined revenue and net profit attributable to the parent company reached NT$4.6640 trillion and NT$101.5 billion, respectively, both also record highs for the same period. The EPS in the third quarter and the first three quarters of this year was NT$2.8 per share and NT$7.32 per share, respectively. Net profit and EPS for the third quarter increased year-on-year by 5% and 7%, respectively.

Due to the pandemic’s impact on the Zhengzhou campus operations, the Group lowered its outlook for the fourth quarter. However, the fourth quarter will still show growth compared with the third quarter. In addition, performance in the first nine months was better than expected. The full-year outlook for performance is unchanged at "growth.” Looking forward to 2023, taking into consideration inflation, the pandemic and the international political and economic situation, as well as better-than-expected revenue growth in 2022 resulting in a high base of comparison, the Group's outlook on the ICT industry will be relatively neutral.

Revenue in the third quarter of 2022 reached NT$1.7466 trillion, up 24% on year, a substantial growth that exceeded the company's expectations, mainly due to strong demand for consumer smart products. Last quarter’s gross profit margin, operating profit margin and net profit margin attributable to the parent company were 6.16%, 2.78%, and 2.22%, respectively. Although gross profit margin did not improve due to the product mix, the operating profit margin increased by 0.21% from the same time a year ago due to economies of scale and cost control; net profit attributable to the parent company at NT$38.8 billion in the third quarter was a record high for the same period, in line with the company's goal of maximizing profits.

In order to maintain the competitiveness of existing ICT business and expand new ones under the “3+3” strategy, capital expenditure next year will be higher than this year.  Among the regions, China will still account for the highest overall capex ratio, while production capacity expansion will continue for Taiwan, Vietnam, India, Mexico, the United States, and the Czech Republic, in response to customer and market demands. The company will aim to maximize profit in its operations and the outlook for gross profit margin next year is neutral.

Regarding the situation of the Group’s Zhengzhou campus, Chairman and CEO Young Liu said: For Hon Hai, epidemic prevention is a multi-faceted effort that must integrate policy, medicine, health, and production. Safeguarding the health of more than one million employees and maintaining safe production has always been the biggest challenge for management.

Chairman Liu said: A campus with more than 200,000 employees requires strong management capabilities to adhere to epidemic prevention regulations and operate production normally. Facing this epidemic, Hon Hai is continuously making adjustments, in compliance with government regulations. From rapid testing to dine-in to assisting employees to return home, Hon Hai wishes to look out for the rights of the employees and the safety of production, under the prerequisite of employees' health and in respect to their wishes. Currently, after undergoing these adjustments, the overall situation is gradually getting on track.

Regarding recent fake news related to the Zhengzhou campus, Chairman Liu emphasized:  During this period, we saw some deliberately edited, untrue and exaggerated videos and news, which created a lot of panic. We ask that everyone take Hon Hai’s official statements as their primary reference and refrain from spreading false rumors.

Chairman Liu said: The customer officially issued a statement regarding the situation in the Zhengzhou campus. We are also glad to see that the customer prioritizes employee health, and glad to see that demand for high-end models still remains strong. The Henan provincial government has also made it clear that it will fully support Hon Hai and stamp out the epidemic as quickly as possible.

Talking about Hon Hai's proprietary BOL business model, "3+3" new business strategy, including the latest developments in the fields of software and semiconductors, Chairman Liu said he is glad that the BOL model has been welcomed by various countries. In September, Hon Hai and Indonesia's Indika officially established their joint venture; the plan is to produce electric buses and batteries in Indonesia, and establish a comprehensive electric vehicle ecosystem. Meanwhile, ground-breaking for the EV factory in Thailand is slated for November 12. Hon Hai also invested in CEER, a company established with PIF in Saudi Arabia. This will be based on the contract design and manufacturing service (CDMS) model, with Hon Hai responsible for developing the vehicle EEA framework and software, with contribution expected to start next year. At the same time, the cooperation between Hon Hai and Vedanta in the Indian semiconductor industry is progressing smoothly; there should be positive news before the end of the year.

"2023 will be a meaningful year for Hon Hai in the EV business. I believe the results of many of our collaborations will be realized one after the other," said Chairman Liu. He said, in that vein, there will be two traditional automakers and three start-ups joining as new customers. Among those, two of the start-ups have joined as new customers, while one of the traditional automakers is likely to join soon.

In terms of progress, official deliveries of the MODEL C are slated for the second half of 2023, while one after the other, the EV pickup, INDIEV prototype and Monarch electric farming tractor are being introduced into the Ohio manufacturing operations. Indonesia's EV bus and battery ecosystem, the Kaohsiung Battery Center, and Mexico's automotive parts factory are also the focus of development next year.

In terms of automotive semiconductors, Chairman Liu said that Hon Young Semiconductor has completed the development of the 1,200V silicon carbide MOSFET process this year, and is currently engaging with many customers. It is expected to start accepting new product orders at the end of this year, obtain vehicle certification in the second half of next year, and began mass production of SiC, as well as provide services such as simulation testing.

Regarding issues related to competition and possible transfer of orders, Chairman Liu said: Any industry that is large in scale will have more than two suppliers. In addition to the competitive advantage of scale, Hon Hai is strong in supply chain management capabilities and manufacturing that requires a huge workforce. Going forward, Hon Hai will continue to create a win-win situation through our global footprint and the BOL model. Competitors cannot easily replicate these capabilities.