Its income from making AI servers and different cloud and networking merchandise, together with for main buyer Nvidia, surpassed good client merchandise comparable to iPhones for the primary time within the second quarter, marking the end result of a shift that started years in the past and has swept via Taiwan’s tech trade.
Foxconn’s heavy reliance on the smartphone enterprise has lengthy been considered by buyers as a major threat, as demand progress for brand spanking new iPhones has progressively weakened since they had been first launched almost twenty years in the past, leaving the highest iPhone assembler grappling with slowing gross sales momentum, analysts stated.
Wary of the chance, Foxconn Chairman Young Liu has been championing new companies comparable to AI servers, electrical automobiles and semiconductors since taking the highest job in 2019.
While its growth into EVs and chips has but to point out a significant contribution to its topline, Foxconn’s success in AI server manufacturing (the corporate is Nvidia’s largest server maker) is the results of its early bets earlier than the know-how was thrust into the limelight with the arrival of ChatGPT in late 2022.
Consumer electronics accounted for 35% of Foxconn’s complete income within the second quarter, whereas cloud and networking enterprise represented 41%. In 2021, client electronics represented 54% of its income.
The agency’s prudent wagers years again helped it domesticate a now-prized relationship with the U.S. AI chip agency and different main AI gamers, analysts stated.
“The firm has been within the enterprise for years, assembly greater high quality necessities, diversifying meeting and operations throughout websites, and pursuing vertical integration,” stated Ming-Chi Kuo, an analyst at TF International Securities.
Foxconn started producing reference designs for Nvidia’s graphics playing cards round 2002 and began making general-purpose servers for cloud service suppliers’ information centres as early as round 2009. Its AI server enterprise with Nvidia is in some ways the end result of that historical past, analysts stated.
Foxconn says it’s now one of many world’s largest suppliers of each general-purpose and AI servers, with a market share of almost 40% in every.
The firm has additionally proven a willingness to commit funding to a mission at an earlier stage than different corporations, Kuo stated, citing its previous investments for Apple and related strikes for Nvidia. “In long-term partnerships, Foxconn is extra keen to take the initiative,” he stated.
Foxconn’s plan to construct factories in Houston, Texas — a part of Nvidia’s $500 billion U.S. funding plan — and in Mexico to supply AI servers for the U.S. consumer underscores this technique, analysts stated.
Foxconn now expects its AI server income would develop greater than 170% within the third quarter year-on-year.
Foxconn and Nvidia declined to remark. Apple didn’t reply to request for remark.
The shift at Foxconn mirrors a broader development in Taiwan’s know-how sector, the place corporations as soon as centred on client electronics — comparable to Foxconn with iPhones, and Quanta Computer and Wistron Corp with notebooks — are actually investing closely in AI servers.
Nvidia companion Wistron’s income for January to July rose 92.7%, whereas Quanta’s grew 65.6% in the identical interval.
“The month-to-month gross sales leap for Taiwan ODMs within the first half of 2025 is proof of this development,” stated Robert Cheng, head of Asia know-how {hardware} analysis at BofA Global Research, referring to authentic design producers like Foxconn that contract manufacture merchandise for his or her shoppers.
Their quick transition into AI servers can be the results of Taiwanese tech provide chain working carefully with U.S. tech giants on information centre infrastructure work for a decade now, in accordance with Chris Wei, trade marketing consultant at Taiwan’s Market Intelligence & Consulting Institute.
He estimates Taiwan accounts for about 80% of worldwide server shipments and greater than 90% of AI servers.
Cheng agrees.
“We think this shift toward AI servers, whatever form it takes, is good for Taiwan’s tech industry,” he stated, noting Taiwanese companies’ means to quickly shift to cater to altering wants from their prospects.
