Foxconn and Sharp Shares Slide After Japan Firms Surprise Writedown

Shares of Taiwan’s Foxconn and its display affiliate Sharp Corp fell on Friday after the Japanese firm reported a surprise $1.9 billion loss due to writedowns related to its flat-screen assets. Foxconn, the world’s largest electronics contract manufacturer, and key Apple supplier, said it would seek an explanation from Sharp and work harder on managing its investment businesses if necessary. The impairment led analysts to downgrade profit forecasts for the company, known for its harsh working conditions, and heightened investor concerns about a global slowdown in technology demand.

Sharp’s shares closed 8.7% lower on Friday, their most significant one-day loss since February. Most of the impairment was at its LCD subsidiary Sakai Display Products Corp, which makes large LCD panels used in televisions, with top clients including South Korea’s Samsung Electronics Co and LG Electronics. Over the past year, it has been a significant earnings drag for Sharp, hurt by sluggish global demand for televisions and other consumer electronics.

TSMC, the world’s biggest chipmaker, also saw its stock slip by almost 5% after it said second-quarter earnings would be lower than expected. Its revenue for the quarter was up only 1.5% from a year earlier, and TSMC’s sales forecast for 2022 fell to its lowest level in more than a decade. The company blamed a continuing global economic slowdown and the trade war between the United States and China for the disappointing results.

Chip stocks across the global market slid on Friday as investors grew concerned that demand was weakening at a time of high inflation and growing geopolitical tensions. The fall in chip stocks accelerated after memory chip maker Micron Technology Inc warned that it would miss its quarterly profit forecast due to softening demand in Asia and Europe.

Investors were also worried about a slowdown in global tech demand and uncertainty over the impact of rising interest rates on growth. A survey by research firm IDC forecasts that global spending on information and communications technologies (ICT) will slow in the second half of this year.

The ICT industry accounts for about a third of global spending on technology, including software, hardware, telecommunications, and services. However, IDC’s survey of over 13,000 companies across 84 countries found that spending on ICT equipment in the second half of this year will be down 5.1% from the first six months and 3.8% down on last year.

Among regional bank shares, the KBW regional banks index ended down 2.4%. After high-interest rates helped collapse three high-profile U.S. bank failures in the past three months, investors re-examined the sector’s health. Walt Disney shares also lost nearly 7% after the media company reported quarterly profits in line with expectations but said total subscribers to its streaming service Disney+ had dropped. Peloton Interactive fell by 7.9% and was offering free seat posts on its exercise bikes to fix a problem that can break while someone is riding.

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