Why Apple is not Foxconn's biggest customer anymore
What's the story
Foxconn, the Taiwanese tech giant known for assembling iPhones, has witnessed a major shift in its revenue streams. For the first time ever, the company's earnings from artificial intelligence (AI) servers and cloud products have outperformed those from consumer electronics such as iPhones. The development comes as part of a broader trend in Taiwan's tech industry moving away from traditional consumer electronics toward AI-focused technologies.
Strategic expansion
AI servers now account for 41% of Foxconn's revenue
Foxconn now commands a nearly 40% market share in the AI server space, making it one of the world's biggest suppliers of general-purpose and AI servers. The company has also announced plans to build AI server manufacturing plants in Houston, Texas, and Mexico. These developments come as part of Foxconn's strategy to diversify its business beyond its traditional reliance on smartphone manufacturing.
Revenue forecast
AI server revenue expected to grow by over 170%
Foxconn expects its AI server revenue to grow by over 170% year-on-year in the third quarter. The company's shift from consumer electronics to cloud and networking products has been a gradual process, with consumer electronics accounting for 54% of its revenue in 2021. However, this figure has now dropped to just 35%, while cloud and networking business now represents a whopping 41% of total revenue.
Business diversification
Shift driven by chairman's push for new businesses
Foxconn's shift from iPhones to AI servers has been driven by its Chairman Young Liu, who has been pushing for new businesses like electric vehicles (EVs) and semiconductors since taking over in 2019. The company is now NVIDIA's biggest server maker, thanks to its early investments in AI server manufacturing before the technology gained mainstream attention with ChatGPT's launch in late 2022.
Strategic partnerships
NVIDIA's biggest server maker
Foxconn's strategic investments over the years have helped it forge a strong relationship with the US-based AI chip firm and other major players in the industry. The company started making reference designs for NVIDIA's graphics cards around 2002 and began producing general-purpose servers for cloud service providers' data centers as early as 2009. This long history has culminated in Foxconn's successful AI server business with NVIDIA.