APPLE’S main manufacturing partner Hon Hai Precision Industry reported better-than-expected profit in the second quarter as the device assembler benefited from strong demand for servers powering AI applications.
The iPhone producer, also known as Foxconn, reported net income of NT$35 billion (S$1.4 billion) in the June quarter, beating an average of analyst estimates for adjusted profit of NT$34.5 billion. Hon Hai’s revenue for the period, released earlier, also surpassed expectations and came in at NT$1.55 trillion, up 19 per cent. This was helped in large part by its growing business of supplying data centre operators with servers containing Nvidia’s AI accelerators.
Hon Hai has set itself the goal of securing 40 per cent of the global AI server market, relying on its close relationships with many of the world’s biggest tech companies and depth of manufacturing expertise. The company’s shares are up close to 80 per cent this year as investors have bought into the artificial intelligence pitch. Earlier this month, compatriot Taiwan Semiconductor Manufacturing Co (TSMC) said its July revenue rose 45 per cent, outpacing estimates and suggesting that AI demand remained robust.
Given the global increase in AI applications, AI servers are likely to become Hon Hai’s key growth engine given its strong partnership with Nvidia,” said Bloomberg Intelligence analyst Cecilia Chan.
“Its robust logistics and manufacturing capability could keep its iPhone assembly share above 50 per cent even as Apple diversifies suppliers, but further ratings upgrade may be capped by low single-digit margins.”
Shipments of the iPhone in China have in recent months reversed a slump from the start of the year, and the global smartphone market is accelerating its growth. Hon Hai, much like TSMC, benefits from any upsurge in consumer electronics demand, and the addition of AI features and enhancements is widely seen as a catalyst driving users to upgrade their devices.
Hon Hai’s July sales jumped 22 per cent thanks to AI server sales, and the company’s Wednesday report indicated it expects growth across most of its business segments in the current quarter. The company expects strong growth from its cloud, networking and components groups, while smart electronics – iPhones included – are set to be roughly flat for the full year. BLOOMBERG
