Apple Supplier Foxconn Says AI Applications Will Drive Demand for Its Server Business

Apple supplier Foxconn said on Wednesday that artificial intelligence applications would strongly drive demand for its server business this year but reiterated 2023 overall would be a flat one for the company on global economic woes.

Foxconn Chairman Liu Young-way told the company's annual shareholders meeting the firm remained cautious about this year due to monetary policy tightening, geopolitical tensions and uncertainty over inflation, but servers were a bright spot due to surging interest in AI.

"More and more people are using ChatGPT," he said. "You can see the market for AI servers will rise much faster than expected. We expect that in the second half of this year there may be a three digit increase."

The Taiwanese company has a 40 percent global market share for servers and aims to further increase that, Liu added.

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

Foxconn this month posted a 56 percent plunge in first-quarter net profit, lagging forecasts in its biggest quarterly fall in three years, and said visibility for the full year was "limited".

The company, the world's largest contract electronics maker, wants to replicate the success it has had with Apple's iPhone with electric vehicles (EV).

Foxconn, formally called Hon Hai Precision Industry, has acquired the former General Motor plant in Lordstown, Ohio, and has also hired a former Nissan executive, Jun Seki, to lead expansion efforts in EVs, where it hopes to become a major manufacturer.

The company is considering expanding its EV battery supply chain beyond Taiwan, possibly into the United States, Indonesia and India, Liu said.

Foxconn, which assembles around 70 percent of iPhones, has been diversifying production away from China, whose strict COVID-19 restrictions disrupted its biggest iPhone plant last year. The company is also seeking to avoid a potential hit to its business from mounting trade tensions between Beijing and Washington.

Liu said China, including its massive iPhone plant in China's Zhengzhou, remained very important for Foxconn.

"The culture there is very similar, our rules and regulations are a bit different, but there is no problem when it comes to talent. So it's relatively easier for us to start new undertakings there. We'll work hard to keep developing there."

© Thomson Reuters 2023