Foxconn: Trump's tariffs are a "major headache" for tech giants

Foxconn: Trump's tariffs are a "major headache" for tech giants

  • 16.03.2025 19:57
  • heise.de
  • Keywords: danger, success

Foxconn, a key supplier to tech giants like Apple and Amazon, faces challenges from Trump's tariffs, forcing production relocations and higher costs in the U.S., Mexico, and China. Tariffs complicate Foxconn's operations, with uncertain demand and geopolitical tensions affecting profitability.

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open_in_newOriginal article

Estimated market influence

Foxconn

Negativesentiment_dissatisfied
Analyst rating: N/A

Tariffs are causing major issues for Foxconn's US customers.

Apple

Apple

Negativesentiment_dissatisfied
Analyst rating: Buy

Apple is facing challenges due to tariffs and production relocation.

Amazon

Amazon

Negativesentiment_dissatisfied
Analyst rating: Strong buy

Amazon is struggling with tariff-related issues.

Nvidia

Nvidia

Negativesentiment_dissatisfied
Analyst rating: Strong buy

Nvidia's production in Mexico faces US tariffs.

Context

Foxconn: Trump's Tariffs Create Challenges for Tech Giants

  • Foxconn Warns of Tariff Impact: Foxconn, a key supplier to tech giants like Apple, Amazon, and Nvidia, highlights that US tariffs are causing significant challenges for its customers.

    • Key Quote: "The issue of tariffs is currently a major headache for the CEOs of our customers."

  • Production Relocation Pressures:

    • Foxconn's US customers increasingly demand production relocation to the USA.
    • Foxconn is building the world's largest factory for Nvidia Blackwell servers in Mexico, but US tariffs on Mexican imports (25%) complicate this strategy.

  • Financial and Market Impact:

    • Foxconn estimates its information and communication products business (dominated by Apple) will remain stable until 2025.
    • Key Figures:
      • 10% tariff on Chinese exports to the US.
      • 25% tariff on Mexican imports to the US.

  • Shift in Revenue Streams:

    • Cloud and network products are expected to account for half of Foxconn's revenue by 2025, overtaking consumer electronics.
    • Key Insight: Weak margins in smartphone assembly have long weighed on Foxconn's balance sheet.

  • Strategic Adjustments:

    • Foxconn plans to work closely with customers to adjust its global production footprint.
    • The company anticipates growth in server demand due to lower hardware investment costs, encouraging more medium-sized companies to advance their cloud capabilities.

  • Geopolitical and Regulatory Risks:

    • Uncertainties related to geopolitics and tariffs will challenge manufacturing and demand in the near term.
    • Foxconn acknowledges potential long-term effects of US tariff policies on production costs and global supply chains.

  • Profit Outlook:

    • Foxconn reported a decline in fourth-quarter profits, attributed to reduced non-operating income rather than core business performance.

Competitive Dynamics and Strategic Considerations:

  • The tech sector faces increased pressure to navigate complex geopolitical and regulatory landscapes.
  • Relocation of production to the US or other regions may increase costs but could also offer strategic advantages for long-term market positioning.
  • Cloud service providers are likely to benefit from lower hardware investment costs, potentially accelerating growth in this segment.

Long-Term Effects:

  • The shift toward cloud and network products signals a potential diversification of Foxconn's revenue streams, reducing reliance on consumer electronics.
  • Tariff policies may reshape global supply chains, with implications for both cost structures and competitive dynamics in the tech industry.