Hon Hai revenue growth rises as AI server demand offset weak iPhone sales | World News

Hon hai

The latest iPhone hasn’t spurred as much demand as expected. | Photo: Bloomberg

By Jane Lanhee Lee


Hon Hai Precision Industry Co.’s revenue growth accelerated last quarter, sustaining a bounce-back as demand for the servers that drive AI development offset weak smartphone sales.

 


Apple Inc.’s main manufacturing partner, also known as Foxconn, reported sales rose 20.2 per cent to NT$1.85 trillion ($57.9 billion) for the three months ended September from a year earlier. That compares with the average analyst projection of NT$1.78 trillion compiled by Bloomberg.  

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The company said the third-quarter sales figure was a record for that period and exceeded its own expectations for growth, without specifying the estimate. Sales increased 19 per cent in the June quarter, the Taiwanese company’s first revenue gain since early 2023.

 


Foxconn’s sales is helped by a growing business supplying servers containing Nvidia Corp.’s AI chips. In August, it said it expected revenue to grow for the rest of the year. The company’s shares are up more than 85 per cent in 2024.


What Bloomberg Intelligence Says

 


Hon Hai’s sales growth could accelerate in 2024-25 as the proliferation of AI emerges as the company’s key growth engine and iPhone demand stabilizes. Its vertical integration and global footprint put it in a favorable position as AI server complexity increases and demand for local production rises. More upside could be unlocked in the next few quarters as the supply of Nvidia’s GPUs improves and new models such as Blackwell GB200 are launched. Smart consumer electronics and computing products, which together accounted for 64 per cent of total sales in 1H, could stabilize as smartphone and PC demand bottom out. Its EV contract manufacturing business might be lackluster amid a slowdown in global EV demand, and the contribution to sales could remain marginal.


Hon Hai and other hardware suppliers are riding a wave of spending on servers and data centers from big tech firms including Meta Platforms Inc. and Alphabet’s Google. But questions are bubbling up about how long the spending will last without a home run AI application that can bring the tech firms a return on the massive infrastructure investment.


As the world’s biggest assembler of the iPhone, the Taiwanese company’s business still remains closely tied with Apple’s. In the second quarter, about 40 per cent of Foxconn’s revenue was still from the Smart Consumer Electronics category including the iPhone, while Cloud and Networking Products including AI servers, contributed to about 32 per cent.


Investors had anticipated a rebound in smartphone demand in 2024, though some analysts warn initial signs suggest the latest iPhone hasn’t spurred as much demand as expected.

First Published: Oct 05 2024 | 10:32 PM IST

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