Foxconn's Apple Era Fades as AI Servers Drive Growth in Taiwan Tech Sector
As it uses the AI boom to diversify its revenue streams, Taiwan's Foxconn, which became a worldwide tech manufacturing powerhouse by assembling millions of iPhones, can now claim that Apple is no longer its primary business.
The shift that started years ago and has swept through Taiwan's tech industry culminated in the second quarter, when its revenue from manufacturing AI servers and other cloud and networking products, including for major customer Nvidia, surpassed smart consumer products like iPhones for the first time.
Investors have long seen Foxconn's strong reliance on the smartphone industry as a serious risk, as the top iPhone assembler is struggling with slowing sales momentum as demand for new iPhones has steadily slowed since the devices were first released almost 20 years ago, according to analysts.
Also Read: Reshma Saujani: Reshaping Social Attitudes Around Gender and Tech
Young Liu, the chairman of Foxconn, has been supporting innovative ventures like AI servers, electric cars, and semiconductors since assuming the position in 2019 because he is cautious about the risks.
Foxconn's success in manufacturing AI servers—the company is Nvidia's largest server maker—is the result of its early bets before the technology was thrust into the spotlight with the introduction of ChatGPT in late 2022, even though its foray into EVs and chips hasn't yet demonstrated a significant contribution to its topline.
Also Read: Tim Cook Nears Retirement, Who Will Take Over Apple's Throne?
In the second quarter, 35 percent of Foxconn's entire sales came from consumer electronics, while 41 percent came from the cloud and networking division. Consumer electronics accounted for 54 percent of their revenue in 2021.
According to analysts, the company's wise bets in the past years have helped it build a valued connection with the American AI chip company and other significant AI companies.
Around 2002, Foxconn started creating reference designs for Nvidia's graphics cards, and as early as 2009, it began manufacturing general-purpose servers for the data centers of cloud service providers. According to analysts, their partnership with Nvidia for AI servers is essentially the apex of that history.
With a market share of around 40 percent in both general-purpose and AI servers, Foxconn claims to be among the biggest providers in the world today.
Citing its prior investments for Apple and comparable actions for Nvidia, Kuo added that the business has demonstrated a readiness to commit to a project early than other companies.
According to analysts, this strategy is highlighted by Foxconn's plans to construct factories in Mexico and Houston, Texas, as part of Nvidia's $500 billion US investment plan, to manufacture AI servers for the U.S. client.
Foxconn currently projects that its revenue from AI servers would increase by more than 170 percent year over year in the third quarter.
The change at Foxconn reflects a larger trend in Taiwan's technology industry, where businesses that previously focused on consumer electronics—like Quanta Computer and Wistron Corp. with notebooks, and Foxconn with iPhones—are now making significant investments in AI servers.