Hung Hai (2317-TW) held a press conference on August 10, 2022 and announced its Q2 financial results. Benefiting from the growth in shipments of consumer smart products, Hung Hai's net income after tax hit a record high in the same period, and its full-year outlook has been revised upward from flat to growth, with gross margin expected to continue to rise in the second half of the year, as well as the progress of updating its diversified layout strategy and answering the external concerns.

Q2 Earnings of $2.4 per share, a record high for the period

Despite the impact of China's East China closure, but the supply chain management, Hon Hai's second quarter was better than the original flat expectations, the single-quarter financial report gross margin, operating profit margin, net profit margin after tax rose three times, and the single-quarter earnings of $2.4 per share, contributing to the first half of the year earnings of $4.53 per share.

Gross margins continue to improve in the second half of the year, full-year outlook upgraded to growth

Mr. Liu Yangwei, Chairman of the Board of Directors, said that the regional political situation is difficult to predict, but after the adjustments in the past few years, the gross margin will continue to rise in the second half of the year without much change; in terms of inventory, although it was relatively high in the first half of the year, with the improvement of the shortage of materials and the onset of the peak season for shipments, the risk of inventory is not significant. Although the outlook for consumer smart products is flat, it has been revised from the lower edge of the range to the upper edge of the range, which has helped to revise the Group's full-year outlook from flat to growth.

The case of Purple Light Investment, the outside world's suspicion explains

The participation of the Hon Hai Group in the investment in ZiGuang has led to misunderstandings, Liu Yangwei said that it is a purely financial investment, mainly optimistic about the profitability is good, and hope to establish a good relationship with customers and suppliers through co-investment. If the investment is not approved, there will be a backup plan.

Four Product Performance

Due to the strong shipments in the previous quarter and the high base period, coupled with the transition period of new and old models, it is estimated that third-quarter revenue will be slightly lower than that of the second quarter, but could be at the same level as the same period last year. In terms of cloud network products, although the market has doubts about the demand for data centers recently, the demand for servers from Hon Hai's customers remains strong, especially for CSPs, which will see double-digit growth, and the demand for nettops will also increase. Overall, the third quarter will be the same as the previous quarter, with an annual growth of double-digits. Although there are more noises in computer terminal products, Liu Yangwei believes that Hon Hai's customers and product portfolio is better, in addition to the supply chain management also has an advantage; components and other products benefited from the lens module, acoustic components, will be compared with the previous quarter and the same period last year growth.

Electric Vehicle Layout and Battery Production Schedule

Mr. Liu disclosed that there will be new customers for electric vehicles in the future, and it is known that there are 2 traditional car factories and 3 start-ups. With the injection of existing and new customers, the Ohio plant can be filled up in 2024 and produce 500,000 to 600,000 vehicles annually. As for the progress of Model C and Model E, which are self-developed by Hung Hwa Advanced, it is estimated that they will be mass-produced in the second quarter of 2024. He also revealed that MIH alliance will launch self-developed electric vehicles in the future to show the benefits of standardization and modularization.

As for the battery production schedule, the development of electric bus battery cells that will use lithium iron phosphate (LFP) cathode material is nearly complete, with samples to be delivered in the 3rd quarter and production expected to begin in the 4th quarter. The 6 billion yuan Kaohsiung Ho-Fa Park pilot production center will be started in the 3rd quarter, and mass production will start in the 1st quarter of 2024.

Semiconductor Layout

The supply chain risk caused by the epidemic, so that the safety and control of the semiconductor key stable production capacity, systems and automotive customers have become a strong demand, Hon Hai's current layout of the semiconductor is still mainly information communication and electric vehicle demand, taking into account the Group's BOL (business localization) strategy, will begin to regionalize the layout. [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]