Foxconn Sees AI Driving Strong Server Demand, But Entire Year Will Be Flat

TAIPEI (Reuters) – Apple Inc’s supplier Foxconn said on Wednesday that artificial intelligence applications would strongly boost demand for its server business this year, but reiterated that 2023 overall would be flat for the company. company due to global economic difficulties.

Foxconn Chairman Liu Young-way told the company’s annual shareholder meeting that the company remains cautious this year due to tight monetary policy, geopolitical tensions and uncertainty over inflation. , but that servers were a silver lining due to the growing interest in AI.

“More and more people are using ChatGPT,” he said. “You can see that the AI ​​server market will grow much faster than expected. We expect that in the second half of this year, there could be a triple-digit increase.”

The Taiwanese company has a global market share of 40% for servers and aims to increase it further, Liu added.

In the first quarter, Foxconn’s cloud and network products segment, which includes servers, accounted for 22% of revenue, just behind smart consumer electronics – which includes smartphones – at 56%.

Foxconn reported a 56% drop in first-quarter net profit this month, lagging expectations for its biggest quarterly decline in three years, and said visibility for the full year was “limited”.

The company, the world’s largest contract electronics maker, wants to replicate the success it had with Apple’s iPhone with electric vehicles (EVs).

Foxconn, officially called Hon Hai Precision Industry Co Ltd, acquired the former General Motor Co plant in Lordstown, Ohio, and also hired a former Nissan executive, Jun Seki, to lead expansion efforts in electric vehicles , where he hopes to become a major player. maker.

The company plans to expand its electric vehicle battery supply chain beyond Taiwan, possibly to the United States, Indonesia and India, Liu said.

Foxconn, which assembles about 70% of iPhones, has diversified production away from China, whose strict COVID-19 restrictions disrupted its biggest iPhone factory last year. The company is also seeking to avoid its business being affected by rising trade tensions between Beijing and Washington.

Liu said China, including its massive iPhone factory in Zhengzhou, China, remains very important to Foxconn.

“The culture there is very similar, our rules and regulations are a bit different, but there’s no problem when it comes to talent. So it’s relatively easier for us to start new businesses there. down. We will work hard to continue to grow there.”

(Reporting by Ben Blanchard and Faith Hung; Editing by Christopher Cushing)

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