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Foxconn upbeat on AI server demand

Apple supplier Foxconn said on Tuesday it remained confident about strong AI server demand this year driving revenue, and pledged to stand by Japan’s Sharp after taking a large, profit-impacting writedown last year.

Foxconn, the world’s largest contract electronics maker and Apple’s top iPhone manufacturer, said on an earnings call it expected flat consumer electronics demand, but reiterated it saw significant growth in 2024 revenue given the artificial intelligence (AI) applications boom.

“The visibility for this year has improved compared to in March, mainly thanks to strong AI server demand,” company spokesman James Wu told a post-earnings conference call, pointing to a better business outlook but without providing detailed numbers.

Foxconn said it expects revenue for the second quarter to grow significantly from a year earlier, broadly in line with previous guidance, with revenue for smart computer electronics likely to be flattish.

It also forecast demand for consumer electronics to be flat this year. It does not provide numerical guidance.

For the first three months of 2024, Foxconn reported a 72% rise in profit coming off a low base from the same period a year earlier, but the growth was lower than expected.

Apple’s quarterly results and forecast beat modest expectations this month, and CEO Tim Cook said revenue growth would return in the current quarter.

In a separate statement, Foxconn, whose earnings took a hit last year from a T$17.3 billion ($533.9 million) writedown related to its 34% stake in Sharp Corp, said it was committed to the Japanese electronics maker, describing it as an “important asset”.

“The worst is behind Sharp. Its future only gets better from here,” Foxconn Chairman Young Liu said, adding that the Japanese company’s Sakai factory would be transformed into an AI data centre.

Liu did not appear on the earnings call. Foxconn said he was in Europe on a business trip, but did not give details.

The Taiwanese company, the world’s largest contract electronics maker, said net profit for the January-March quarter rose to T$22.01 billion from T$12.8 billion in the same period a year earlier, when earnings were hit by the Sharp writedown.

While Foxconn’s quarterly profit missed the T$29.31 billion forecast by analysts, it was the firm’s third consecutive quarterly profit rise.

In the first quarter, consumer electronics including smartphones accounted for 48% of its revenue while cloud and networking products, including servers, contributed 28%.

The company, formally called Hon Hai Precision Industry Co Ltd, said in March that it expected a significant rise in revenue this year driven by booming AI server demand.

Foxconn also wants to replicate the success it has had with iPhones with electric vehicles (EV), saying on the call it expected EV sales to be expanded to markets including Southeast Asia, the United States and Europe, though it did not provide a time frame.

Wu said recent price cuts for EVs have presented an opportunity for Foxconn, which he said was in talks with some 20 to 30 companies including traditional car makers and start-ups for possible collaboration.

“That creates opportunities for outsourcing, which is good for Foxconn,” Wu said, referring to the price cuts.

Foxconn’s shares have risen 65% so far this year, driven by its rosy AI outlook, far outperforming a 17% gain for the broader market. Reuters

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