The main manufacturing contractor for Apple and Nvidia, the Taiwanese company Hon Hai Precision Industry Co., operating under the Foxconn brand. reported that for the second month in a row its revenue showed only single-digit growth. This has raised concerns that demand for AI infrastructure hardware is slowing and will not be able to offset weak iPhone sales.
Image source: foxconn.com
Foxconn is a key partner in building AI servers for Nvidia. Today the company reported that in November its revenue amounted to 672.59 billion Taiwan dollars ($20.7 billion), and this is only 3.5% more than the previous month. Foxconn’s October and November sales fell short of analysts’ estimates, which had predicted 13% growth for the quarter.
With the advent of ChatGPT, Hon Hai and other hardware providers have boosted their financial performance as tech giants including Meta✴ and Google have sharply increased spending on servers and data centers. But investors are already beginning to doubt that the tech giants will turn these expenses into profit: AI applications still have not demonstrated phenomenal commercial success. And Apple is expecting subdued annual results.
In its latest earnings report, Hon Hai management said that in 2025, revenue from its cloud hardware segment, including AI servers, will be about the same as its smartphone segment – Apple historically accounts for 50% of the company’s revenue. Meanwhile, US President-elect Donald Trump announced his intention to impose strict tariffs on Taiwanese contract manufacturers – during his first term in the White House, the company began diversifying its production sites, a trend that is still relevant today. Foxconn moved part of its production to India, although the bulk of its sites remained in China. After Trump’s election, the company also announced plans to build a $33 million plant in Texas to produce AI servers.