Foxconn’s AI listing and its shift to AI-enabled servers
Foxconn, the Taiwanese contract manufacturer listed as Hon Hai Precision, has filed as an AI listing with the US-based AI chip group Nvidia. The company has partnered with Nvidia for seven years to create AI-ready servers, although it was a niche obsession rather than an investment frenzy at that time. Foxconn expects sales to double in H2 2021 due to increased demand for AI-enabled servers, for which its sales of the division reached NT$1.1tn ($36bn) last year.
Foxconn made a fortune working for Intel in the PC boom of the early 2000s and then became Apple’s largest manufacturing partner. With smartphone sales slowing down, it is shifting to the next big thing, which includes AI.
Highlight:
– Foxconn filed as an AI listing with Nvidia.
– Foxconn expects sales to double in H2 2021 due to increased demand for AI-enabled servers.
– Sales of the division reached NT$1.1tn ($36bn) last year.
– Foxconn has partnered with Nvidia for seven years to create AI-ready servers.
– The Taiwanese group made a fortune working for Intel in the PC boom of the early 2000s and became Apple’s largest manufacturing partner.
Foxconn’s first-quarter net earnings dropped by 56% due to a slowdown in consumer electronics, including smartphones, which still account for nearly 60% of total sales. Operating margins remain razor-thin at just 2.8%. Heavy investment in the production of contract electric vehicles is already a drag, and the global tech battle could make it harder for Foxconn to produce US smartphones in China.
However, AI should give Foxconn the biggest boost, strengthening the server division in the near term and orders for new AI-enabled devices in the medium term. It canceled a plan for a $10bn advanced display plant two years ago, shifting its focus to servers. The stock is up a fifth from its October low to the high of its five-year range based on forward earnings, and the rally should continue as long as the AI rave continues.
Summary:
Foxconn has partnered with the US-based AI chip group Nvidia to create AI-ready servers, with which its sales reached NT$1.1tn ($36bn) last year. The company expects to double its sales in H2 2021 due to increased demand for AI-enabled servers. After making a fortune working for Intel in the early 2000s and becoming Apple’s largest manufacturing partner, Foxconn is shifting to AI since smartphone sales have slowed down. Although consumer electronics still account for nearly 60% of its total sales, heavy investment in contract electric vehicles and global tech battles have made Foxconn’s margins razor-thin. AI is expected to give Foxconn the biggest boost as it strengthens its server division and accommodates orders for new AI-enabled devices in the medium term. The rally in Foxconn’s stock should continue as long as the AI rave continues.
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Some non-fashionable people have the knack of showing up to all the coolest parties. In the tech world, that goes for Foxconn. It became the latest company to file as an AI listing on Wednesday, through its relationship with US-based AI chip group Nvidia.
Foxconn is a theoretically prosaic contract manufacturer listed in Taiwan as Hon Hai Precision. He made a fortune working for Intel in the PC boom of the early 2000s. Then he became Apple’s largest manufacturing partner. Now, with smartphone sales slowing down, it’s shifting to the next big thing.
Foxconn expects sales to at least double in the second half due to increased demand for AI-enabled servers. Sales of the division reached NT$1.1 trillion ($36 billion) last year.
The Taiwanese group partnered with the US AI chip developer seven years ago to create AI-ready servers. At that time, TO THE it was a niche obsession rather than an investment frenzy.
Consumer electronics, including smartphones, still account for nearly 60% of total sales. A slowdown here forced Foxconn to post a 56% drop in first-quarter net earnings. Operating margins remain razor thin at just 2.8%.
These could go down further. The global tech battle could make it harder for Foxconn to produce US smartphones in China. Heavy investment in the production of contract electric vehicles is already a drag. Some relief should come from the listing of electric car unit Foxtron in Taiwan.
But the biggest boost should come from artificial intelligence. This will strengthen the server division in the near term and orders for new AI-enabled devices in the medium term.
Foxconn showed up in more than one warehouse anticipating a party that never even started. It canceled a plan for a $10 billion advanced display plant two years ago, shifting its focus to servers.
The stock is up a fifth from its October low to the high of its five-year range based on forward earnings. The rally should continue as long as the AI rave continues.
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