It was amazing! From 1Q to 2Q the company has been in a constant state of expansion and improvement. The global assembly lines have seen great progress with all of them being operational. As seen from this graphic, they have continued making their workforce more efficient every day. In addition to that, many new suppliers are getting involved. At first glance, it looks like the line is going down but what happens next is even better. For instance, there was a big announcement that we would be working on building factories outside China, mainly focusing on Australia. This means that instead of just Chinese workers who work for Foxconn, the companies will now be sending Australian people. So yeah, there was some good news during the quarter! Here’s an overview of everything that happened in the second quarter.
1Q18 — Q1 and 5Q
In terms of revenue, at the end of the quarter, I’m pretty happy with sales! Both divisions had very impressive numbers in 2020, despite the challenging environment the world has faced over the past year. We could also see growth in our customer base as well as profitability! Overall, the quarter had the best sales performance in the Company’s history. Sales grew by +11% year-on-year.
For factory operations, as explained before, we have expanded operations outside of China. Now, we have two plants — one located in South Korea (~30% of net income) and the other located near Vietnam (approximately 30% of net income). These plants are in areas where low labor costs, combined with the favorable cost of living conditions combined with high demand. There’s a lot happening here! During the first half of 2021, there have been significant improvements with these expansions. With a focus on efficiency, we’re improving productivity, reducing cycle times as well as using robots to increase throughput.
As part of this effort, we started hiring additional employees in both of these locations. On top of that, we also acquired Konsultant, which will allow us to offer services beyond manufacturing as well as supply chain management. Lastly, we are investing $50 million into expanding our distribution center in Taiwan. Because of its small size, this plant can handle large amounts of production and logistics while still offering the same quality standards as our current operation.
2Q18 — Q2 Performance
There have also been major developments in our business around Asia. When compared to last year’s performance, we saw a reduction in order bookings. While this may not seem like much at first, the fact remains that the market has become more competitive. Additionally, COVID cases have surged in several parts of China prompting restrictions that are impacting businesses negatively. All of these factors led to lower-than-normal orders to ship, especially since most manufacturing facilities were operating at full capacity. However, there were some positive trends in Q2 as well. One thing worth noting is that Q2 saw a decrease of 12% in total labor utilization, while the average time spent waiting to receive goods increased slightly. While shipping delays are generally expected, I’m sure there are lots of things that didn’t go according to plan. Unfortunately, because of these issues, the shipment rate increased throughout the quarter, reaching 120%. That’s why it comes as no surprise to see our overall delivery rate increase -1.7% compared to Q1 2019. Of course, we had a mix of products shipped which meant a slower pace of delivery but nevertheless, it did have a solid result. Even though shipments were delayed due to logistical difficulties, it seems unlikely these issues will hinder our ability to meet up with future requirements.
In terms of gross margin, consolidated revenues rose 6%. Gross profit grew 9% year-on-year to RMB6.86 billion (USD 4,832). This is really quite a change from when this division had a 3% loss in 2017. This performance shows how hard our team works and how dedicated our employees are and how focused we are on meeting customer demands. Our margins are coming in strong while maintaining our pricing structure. As always, I’m thrilled about the investments we’ve made in technology and automation. With so many benefits such as predictive maintenance, autonomous vehicles, and robotics, it’s clear that this investment is paying off.
Overall, this is another huge step forward for our product portfolio. By taking advantage of the rising consumer demand in Southeast Asia, we’re able to expand production and reduce transportation costs. This allows us to offer higher quality service and make an even greater impact on customers’ lives. Another key area of success is digitalization. Right now, our teams are leveraging Google Drive to manage inventory, orders, information, and many other processes in real time. And I mean, real-time. Within minutes, I can upload files onto my computer or mobile device to get notified immediately. Not only that, but once data is uploaded and processed, you never have to re-read data again. But it goes further than that. After receiving data after processing an order, you can actually take action within seconds.
3Q18 — Business Update
Overall, I’m glad to report that we managed to successfully ramp up production capabilities while keeping demand steady. Obviously, this is a great achievement that is reflected across the entire organization. However, to do this, the team must maintain consistency. Throughout this process, we have made certain adjustments to help improve productivity, such as streamlining operations, automating internal processes, and upgrading IT. Together, these efforts have resulted in a 14% improvement in order backlogs.
Given that there are currently 15 weeks left before we officially close out Q1, I’m particularly pleased with the way our customers and partners have been responding to our initiatives. Most importantly, I am incredibly proud of everyone’s perseverance during this period. Hopefully, we continue on this trajectory moving forward!
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