Despite decline in demand for electronics owing to geopolitical reasons and a global economic slump, the surge in sales in its AI server business has helped Foxconn maintain a balance.
Taiwanese electronic manufacturer Foxconn expects massive growth in artificial intelligence (AI) server business in the forthcoming year. Despite the uncertainty among Asian countries in the wake of Trump’s re-election and his promise to increase tariffs on imports, the company has decided to increase investment in several countries.
Trump has threatened to impose 60% tariffs on Chinese goods and 10% tariffs on all other US imports, which is bound to be a severe blow to Foxconn, whose Zhengzhou plant in China is a major iPhone assembly location.
However, the company is convinced that its AI servers will constitute nearly 50% of its total server revenue in 2025. Foxconn Chairman Young Liu said that the company’s Wisconsin and Texas plants have reported consistent growth in sales on account of strong demand for their AI servers. It reported that while there was a considerable decline in demand for electronics owing to geopolitical reasons and a global economic slump, the surge in sales in its AI server business has helped the company maintain a balance.
The company is one of the main suppliers to Nvidia, which surpassed Apple earlier this month, riding the AI wave, to become the largest company in the world. Foxconn is confident that the high demand for Nvidia’s GB series servers will only increase every quarter next year and therefore, it has already ramped up production capacity.
Liu has said that along with smartphones, the company is targeting to take over at least 40% of the global AI server market, projecting is one of the major products of the company. This includes the clouds, networking as well as the servers. The efforts to realise these goals as already underway as the construction of the world’s largest manufacturing plant has already begun in Mexico.
This facility will be used for bundling Nvidia’s GB200 Superchips which is a key component of the next-generation Blackwell family computing platform. The company is one of the biggest benefactors of the AI boom, as it assembles servers used to process AI work. Nvidia reported in August that in its fourth quarter, it expects billions in revenue from these superchips.
Liu had also said in the past that Foxconn is ready to take on the AI revolution and that the company possesses the necessary infrastructure and technology such as advanced liquid cooling and heat dissipation equipment for the GB200 servers.
The company did have ambitious plans to diversify its product portfolio by also expanding into the production of electric vehicles (EVs). However, as the industry is being plagued by falling demand, Foxconn has delayed its target of capturing 5% of the EV market share by 2025. Not only Foxconn, but it appears as though companies across the globe are scaling down their EV production. While European carmakers had initially cited strong competition from Chinese companies and the recent economic trough as the reasons for the declining demand, the soon-to-be-implemented Trump tariffs are yet another reason for the decline in this industry.
During his election campaigns, the recent President-elect had stated that he would scale back on or altogether eliminate all EV tax breaks and other incentives. He has also promised to renew oil drilling licenses and ensure Chinese and other foreign companies cannot sell their automobiles in the US without setting up manufacturing facilities and hiring American labourers.
The implementation of such strong protectionist policies is bound to wreak havoc in the global supply chain, but companies are trying to bypass these regulations. Foxconn has announced that it is working towards building an EV partnership with Japanese automakers. While there is looming uncertainty in the international market, Foxconn remains optimistic that the AI wave is sufficient to keep its business growing and that its vision to diversify its products range, will see fruition despite these initial snags and setbacks.
