Foxconn Forecasts Big Surge For AI Server Business As It Gains From Rise Of Generative AI

Taiwanese tech giant Foxconn (officially known as Hon Hai Precision Industry), the world's biggest contract electronics manufacturer, has forecasted that its artificial intelligence (AI) server business will at least double in the second half of this year.

Best known for manufacturing and assembling Apple's iPhone products, Foxconn has recently moved to diversify beyond contract electronics manufacturing assembly by foraying into areas ranging from electric vehicles to semiconductors and servers.

"In 2022 alone, Hon Hai's revenue for servers reached $36 billion to obtain a 40 percent global market share," Chairman Young Liu told an annual shareholders' meeting in Taipei.

"For the second half of this year, we may have a three-digit growth, not two digits... We will continue to boost our market share for servers," Liu said.

In the first quarter, Foxconn's cloud and network products segment, which includes servers, accounted for 22% of revenue, second only to smart consumer electronics - which includes smartphones - at 56%.

AI servers made up about 20 per cent of Foxconn's total server sales last year, Liu said, adding that the company had taken advantage of solutions provided by Intel Corp, Advanced Micro Devices Inc and ARM Ltd to roll out AI servers.

Liu attributed the jump in demand to the rapid rise of generative artificial intelligence systems such as ChatGPT.

The huge surge in demand for AI servers catapulted chip designer Nvidia, albeit briefly, into the $1 trillion valuation club.

Foxconn's latest AI servers also use Nvidia chips.

In 2016, Foxconn and Nvidia formed a partnership to develop servers that offer artificial intelligence capabilities.

Foxconn has been aggressively foraying into semiconductor and EV business amid concern about its reliance on its low-margin business as an Apple supplier.

Foxconn is partnering with Infineon Technologies to develop silicon carbide (SiC) semiconductors, leveraging Infineon's automotive SiC innovations and Foxconn's expertise in automotive systems. Infineon is a world leader in power semiconductors.

It recently started trial production of a third-generation SiC semiconductor for use in electric vehicles for five clients. A 6-inch SiC wafer plant in Hsinchu acquired by it from Macronix International Co in 2021 has begun commercial production.

Foxconn also established a joint venture with Taiwanese electronics component maker Yageo in 2021 to design automotive chips, securing a foothold in front-end chipmaking.

Foxconn has set an ambitious goal of capturing at least a 5 per cent share of the global electric vehicle market by 2025, aiming to generate US$30 billion in EV sales. It will face tough competition from established players like Tesla, Volkswagen and General Motors.