People wear masks to protect themselves from the coronavirus disease (COVID-19) while listening to the annual general meeting at the lobby of Foxconn's office in Taipei, Taiwan, June 23, 2020.
People wear masks to protect themselves from the coronavirus disease (COVID-19) while listening to the annual general meeting at the lobby of Foxconn's office in Taipei, Taiwan, June 23, 2020. Reuters / Ann Wang

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, as a shortage of chips squeezes smartphone production and demand cools following a surge during the pandemic.

The Taiwanese company, which had stopped production in China earlier this week to comply with government curbs, said separately that it had restarted some production and operations at its Shenzhen campus after meeting government conditions for staff to live and work in a bubble.

The stoppages from Foxconn - the world's largest contract electronics maker - and other companies including Japan's Toyota Motor have fuelled concerns over how global supply chains could be impacted as China deals with its biggest spike in COVID-19 infections since early 2020.

Chairman Liu Young-way said on a post-earnings call on Wednesday that Foxconn would only have better clarity on supply chain uncertainty in the second half of the year, but added that he was "cautiously positive" about the company's 2022 sales outlook.

Liu had previously warned that he expected the chip shortage to run into the second half of 2022.

Foxconn, formally called Hon Hai Precision Industry Co Ltd, said it expected revenue for the first quarter as well as the year to range between a 3% fall and a 3% rise. Analysts expected revenue this year to rise 1.2%.

The company forecast smartphone revenue to be flat in 2022.

Foxconn has in recent months announced plans to become a major player in the global electric vehicle (EV) market. On Wednesday, it said it doesn't expect revenue from EVs to be significant until 2023.

In the fourth quarter ended December, Foxconn's revenue fell 6%, its first decline in five quarters.

Revenue from its key smart consumer and electronics products business fell between 3% to 15%, in the period. Smartphones account for 60% of this business.

Revenue from its cloud and networking products as well as computing products was flat. Components revenue rose more than 15%.

Foxconn shares closed 0.5% higher ahead of the earnings release, versus a 0.1% gain in the broader market. They have fallen 2.4% so far this year.

Net profit fell 3.4% to T$44.4 billion ($1.55 billion) in the October-December period. That compared with the T$43.32 billion average of 10 analyst estimates compiled by Refinitiv.

($1 = 28.5700 Taiwan dollars)