Hon Hai Precision Industry Co., the listed vehicle of Foxconn Technology Group and Apple iPhone largest manufacturer, is anticipating substantial revenue growth in the second half of the year from the sale of servers designed for AI training and hosting services. Chairman Young Liu revealed at the annual shareholders’ meeting that the company generated NT$1.1 trillion ($35.8 billion) in revenue from its overall server business in 2022. Additionally, Hon Hai is collaborating with Nvidia Corp. on autonomous driving applications, further diversifying its AI-related ventures.
Foxconn Expects Doubling of AI Server Business
Foxconn, the world’s largest contract electronics manufacturer renowned for producing the iPhone, projects that its AI server business will at least double in the second half of this year. The company’s chairman, Young Liu, stated during the annual meeting that they foresee triple-digit growth in AI servers. This surge in demand for processors used in such servers has propelled chip designer Nvidia to become the most valuable semiconductor company. Foxconn attributes the rising popularity of generative AI systems like ChatGPT and increased reliance on them as the driving factors behind the increased demand.
Foxconn’s Broad Footprint in AI Server Market
Although Foxconn is primarily recognized as Apple’s main manufacturing partner, the group is involved in a vast range of electronic products and components, including computers, industrial robots, electric cars, and semiconductors. Alongside competitors like Quanta Computer, Foxconn produces a significant proportion of servers sold by branded vendors such as Dell, while also directly manufacturing servers for large data center users like Google and Amazon. Out of Foxconn’s NT$6.6 trillion ($215 billion) revenue in 2022, NT$1.1 trillion was attributed to server manufacturing. Foxconn holds a 40% global market share in servers and 20% of its server business is in AI.
Industry Trends and Projections
Foxconn’s optimistic forecast aligns with Nvidia’s recent upward revision of its revenue outlook due to the exponential growth in data center capacity required for AI system training. Nvidia is expecting $11 billion in sales for the three months ending in July, surpassing analysts’ expectations by more than 50%. The escalating demand for AI-fueled growth has also been acknowledged by Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, which anticipates “structurally higher demand.” However, despite the positive outlook for AI server sales, Foxconn remains cautious about the global economy due to inflation and geopolitical tensions, maintaining its previous forecast of flat revenues in 2023.
Foxconn’s Role in AI Server Manufacturing
While electronics manufacturing service providers like Foxconn primarily focus on assembling tech gadgets and producing lower-end components, they receive a smaller share of the revenue from the AI server boom compared to chip design companies like Nvidia. According to chip research firm SemiAnalysis, assembly and testing constitute only $495 of the $10,424 cost of an Intel Sapphire Rapids AI server. Other components manufactured by Foxconn, such as connectors, chassis, cooling systems, and motherboards, play minor roles in the AI server’s bill of materials. However, given Foxconn’s extensive footprint across various sectors, the cumulative impact contributes to the company’s momentum in the market.