Contract electronics manufacturing giant Foxconn banks on explosive AI popularity to drive its server business revenue in 2023.
Foxconn has forecasted significant growth in its artificial intelligence (AI) server business due to robust demand. On Wednesday, the company’s Chairman, Young Liu, said revenue generated from its AI businesses would more than double this year. Liu credited the popularity of generative AI applications like ChatGPT for stoking interest in the sector.
At Foxconn’s annual shareholder meeting in New Taipei City, the leading Taiwanese contract electronics manufacturer’s Chairman said:
“People’s reliance on ChatGPT is growing. What we are seeing now is the demand for AI servers is expanding. The growth of Foxconn’s AI servers is forecast to be increasing by three-digit percent [in 2023].”
Liu pointed out that Foxconn, also known as Hon Hai in China and Taiwan, realized server revenue of 1.1 trillion Taiwan dollars ($36 billion) in 2022. According to the Chairman, this feat made the New Taipei-based company claim a 40 percent global market share. However, Liu believes last year’s achievements would pale compared to the sales prospects of Foxconn’s AI server business for 2023. He noted that AI servers remained bright amid fiscal policy tightening and rising inflationary pressure. Nonetheless, despite prevalent macroeconomic uncertainty, the Chairman doubled down on his upbeat predictions for 2023, saying:
“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 also said Foxconn remained cautious and suggested the firm would continue to operate efficiently but prudently.
Foxconn to Deepen Market Dominance by Leveraging Diversified Services Alongside AI Interests
Liu’s bold growth claims suggest that Foxconn seeks to increase its server market dominance by leveraging the AI boom. The company is currently the world’s largest contract electronics manufacturer, assembling devices for several renowned brands, most notably Apple (NASDAQ: AAPL). Additionally, Foxconn’s clientele includes Microsoft (NASDAQ: MSFT), Google (NASDAQ: GOOGL), Hewlett-Packard (NYSE: HPQ), Dell (NYSE: DELL), and Amazon‘s (NASDAQ: AMZN) Web Services.
Over time, Foxconn has diversified beyond its base electronics assemblage and now has businesses in servers, electric vehicles, and semiconductors. Liu said the company is number one in the global mobile phone and personal computer market share. Additionally, its AI server market is growing much quicker than anyone anticipated.
Liu also stated that Foxconn’s latest AI servers use Nvidia (NASDAQ: NVDA) chips.
Foxconn Outlook on 2023 Full Year Restrained Despite AI Boon
Foxconn’s positive outlook on generative AI follows the company’s underwhelming Q1 2023 net profit haul. Earlier this month, the leading contract electronics manufacturing firm reported a 56% plunge in first-quarter profits, its most significant setback in three years. The decline was due to a substantial multi-billion-dollar write-down from Foxconn’s 34% stake in Japanese electronics manufacturer Sharp Corp.
In early May, Foxconn also ascribed a massive 12% sales drop in April to a decline in smartphone shipments. Despite the projected growth in artificial intelligence demand, the Taiwanese company maintains a “flat” outlook for the 2023 full year. “We still think the performance for this year would be flattish from last year,” Liu explained. The Chairman also added that market visibility was still low.
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