Jabil CEO Cites ‘Distinct Decline’ in Connected Devices Demand

Contract manufacturer Jabil expects some “consumer-centric” end markets “to underperform” during its fiscal 2023 ending Aug. 31, “compared to the robust growth of the past 18 months,” said Chief Financial Officer Mike Dastoor on an earnings call Tuesday for fiscal Q4 ended Aug. 31.

“Unlike past economic slowdowns, when Jabil was highly concentrated in a particular product or end market,” said Dastoor, “today it is critical to think of Jabil not as one company, but as a well-diversified accumulation of many end markets.” Jabil expects “a number of them,” especially vehicle electrification and healthcare, “will continue to benefit from long-term secular tailwinds,” said the CFO.

Jabil’s fiscal 2023 guidance “presumes a modest economic slowdown” that will impact “certain end markets more than others,” said Dastoor. Jabil expects fiscal-year revenue in its connected devices segment to decline 9% to $4.3 billion, while revenue in its mobility segment is projected to fall 3% to $3.8 billion.

Within Jabil’s connected devices business, which is “made up of a number of different customers, demand generally remains resilient,” said Dastoor. “But given the consumer-centric nature of this end market, as we move from the pandemic view of consumer spending to a more normalized environment, we think it’s appropriate to take a conservative outlook and expect some moderation in growth,” he said.

In Jabil’s mobility business, “demand signals continue to be strong,” said Dastoor. The current fiscal Q1 ending Nov. 30 has “historically been associated with channel fill during the seasonal product launch,” and so customarily is the year’s “highest revenue quarter” for Jabil’s mobility end market, he said. “We have a long track record of operating successfully in this end market, which is being uniquely positioned within the portfolio, as we partner with the most innovative brand and market leader in this space.” Apple is known to be Jabil’s largest smartphone customer.

Connected devices, “as we sit today,” is the only area of the business where Jabil is experiencing “distinct decline in demand,” said CEO Mark Mondello.

Jabil anticipates “no big changes” to its global manufacturing “footprint” in calendar 2022 or 2023, said Mondello. “We really like the footprint that we have,” he said. “Our current footprint, with the number of factories we have in the U.S. and our ability to expand those factories, might serve us well to the extent there’s some reshoring,” he said. “We’ll see what happens with the Chips Act. We’ve been staying very close to that directly with our friends in D.C. There’s a lot of details that need to be worked out there.”

Thinking back to about a year ago, Jabil had “tremendous challenges more broadbased across the supply chain,” said Mondello. “As we sit today, we still have pockets of challenges,” he said. “I’d say the biggest challenges we have are around legacy semiconductors. The biggest friction points continue to be around the EV space.”

St. Petersburg, Florida-based Jabil has “no material impact whatsoever” baked its guidance for fiscal Q1 from Hurricane Ian, which is projected to make landfall in Tampa Bay as a Category 3 storm late Wednesday into Thursday, said Mondello. “Specific to the storm, these things ebb and flow by the hour,” he said. Roughly 3,000 Jabil employees are based in the Tampa Bay area, he said. Plans were to close Jabil’s St. Petersburg “campus” Tuesday afternoon and to keep it closed through the end of the week, he said.