Foxconn Technology Group, Apple’s main contract manufacturing partner, has announced a positive financial outlook for the current quarter and the remainder of the year. The Taiwan-based company, formally known as Hon Hai Precision Industry, said it had posted strong profit growth in the June quarter.
The growth was due to the higher demand for servers used in artificial intelligence (AI) applications. The company’s net income for the June quarter was NT$35 billion, which is in line with the market expectation. Sales revenue for the same period reached NT$1.55 trillion, up 19% from the same period last year. This was mainly due to the fact that the company increased its shipments of servers to data center operators that use Nvidia’s AI accelerators.
Foxconn plans AI factories and sees share price surge
The company has plans to achieve a 40% market share of the artificial intelligence server globally. The company strategy is based on the existing cooperation with key IT vendors and the company’s manufacturing capacity. This has especially been the case in the investment Foxconn has made in AI technology, with the company’s share prices rising by nearly 80% this year. This was highlighted by the company’s plans to construct “AI factories” that would incorporate Nvidia’s chips and software.
Earlier this month, Taiwan Semiconductor Manufacturing Co (TSMC) revealed that its July revenue rose by 45% year-over-year, beating projections. Cecilia Chan from Bloomberg Intelligence suggested that the sales of AI servers could be a major growth factor for Foxconn because of its good relationship with Nvidia.
Chan also pointed to Foxconn’s strong logistics and manufacturing muscles, which could allow it to remain the primary assembler of iPhones even while Apple is sourcing more and more from other contract manufacturers. However, Chan noted that the ratings upgrades may not continue because profit margins are still low, in single digits.
iPhone shipments rebound in China as global smartphone demand increases
The most recent statistics show that iPhone shipments in China have rallied from the previous fall. There has also been a rapid increase in the global market for smartphones. This is because consumer electronics demand has risen, and the integration of AI features into devices has led to user upgrades.
Foxconn’s July sales were up 22%, primarily due to the sales of AI servers. The company’s recent report indicates that almost all the business segments of the company have shown an upward trend in the current quarter. While cloud, networking, and components are expected to be the growth drivers, the smart electronics segment, which includes iPhones, is expected to hold steady for the year.
Foxconn also indicated that the GB200 chip from Nvidia’s AI semiconductor leader was on track and will commence shipment in the fourth quarter in small quantities, which will increase in early 2025.
