Foxconn Reports Modest Sales Growth Amid Concerns Over iPhone Demand
Foxconn, officially known as Hon Hai Precision Industry Co., Apple's leading partner, reported single-digit sales growth for the second consecutive month. This trend has raised concerns about whether the demand for AI infrastructure will be sufficient to offset the weakening iPhone sales.
On Thursday, Foxconn announced that its sales for November amounted to NT$672.59 billion ($20.7 billion), indicating a 3.5% increase. This follows an 8.6% rise in October. However, the combined sales for October and November fell short of analysts' expectations of a 13% growth for this quarter, as reported by Bloomberg News.
Since the introduction of ChatGPT, especially in AI technology, there has been an increase in the revenues of AI hardware providers like Foxconn. The company has benefitted from significant investments made by major tech companies such as Meta Platforms Inc. and Google into servers and data centers.
Despite this, the investment community has expressed doubts about the long-term profitability of these expenditures due to the lack of a definitive AI application that could spur further growth. At the same time, Apple's performance forecasts for the upcoming year indicate a limited expansion phase.
In the latest earnings call, Foxconn executives predicted that by 2025, revenue from its cloud and AI server business would reach the same level as that of the smartphone segment. Historically, Apple has represented more than half of Foxconn's total sales.
The manufacturing sector in Taiwan is also facing potential challenges stemming from U.S. trade policy. The incoming administration under elected President Donald Trump has suggested the possibility of imposing significant tariffs on Taiwanese contract manufacturers.
This threat recalls actions taken during Trump's first term and has pushed companies to diversify their production locations. In response, Foxconn moved part of its iPhone production to India, although China still hosts the majority of its operations.
Foxconn Chairman Young Liu commented on the company's $33 million investment in AI servers dedicated to Texas. Liu suggested that any applicable tariffs would affect Foxconn's competitors more severely than the company itself. The Texas investment was initiated following Trump's election and demonstrates the company's ongoing strategy to expand its manufacturing presence in the U.S. to mitigate tariff impacts.