APPLE’S major manufacturing partner Hon Hai Precision Industry reported a second consecutive month of single-digit sales growth, raising concerns that demand for AI infrastructure will not be able to offset weak iPhone sales.
Hon Hai, also known as Foxconn, is a key server assembly partner to Nvidia. On Thursday (Dec 5), it reported sales of NT$672.59 billion (S$27.8 billion) for November, up 3.5 per cent, after reporting an 8.6 per cent increase for October. The sum of Hon Hai’s October and November sales is trailing the trajectory suggested by analyst projections for 13 per cent growth this quarter, according to calculations by Bloomberg News.
Since the advent of ChatGPT, Hon Hai and other AI hardware suppliers have enjoyed a boost from the massive spending on servers and data centres from big tech firms including Meta Platforms and Alphabet’s Google. But investors are starting to question whether the spending will deliver returns as there is still a lack of a killer AI application. Meanwhile, Apple is expected to have a muted year.
In its latest earnings call, Hon Hai executives said that it expects sales at its cloud business including AI servers to be about the same as that of phones in 2025. Apple’s historically accounted for over 50 per cent of Hon Hai’s overall sales.
US President-elect Donald Trump’s threat to impose stiff tariffs on Taiwanese contract manufacturers will weigh on the sector. The first Trump administration spurred companies to diversify their manufacturing bases, a trend that has since continued. Hon Hai has shifted some iPhone production to India, although the bulk of its manufacturing operations remains in China.
Hon Hai chairman Young Liu recently told reporters that the company’s new US$33 million facility in Texas, an investment announced after Trump’s election, will make AI servers and that it expects tariffs compared to hurt competitors more. BLOOMBERG
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