Taiwan’s Foxconn, the largest contract electronics manufacturer globally, announced on Wednesday a 35 percent increase in second-quarter profit, surpassing analyst expectations, attributed to sustained robust demand for AI, which it anticipates will propel growth throughout the year. Net profit for the April to June period for Nvidia’s largest server manufacturer and Apple’s primary iPhone assembler was T$59.97 billion, compared to an LSEG consensus estimate of T$58.8 billion and reflecting an increase from T$44.4 billion in the same period last year. In an earnings release, the company maintained its prior forecast of “strong” growth for revenue this year and indicated that robust demand for AI is expected to propel growth throughout the year. The company refrains from providing numeric forecasts. The company, formally known as Hon Hai Precision Industry, reported that its cloud and networking products segment, which encompasses AI servers, constituted 51 percent of second-quarter revenue, marking the first instance of surpassing 50 percent.
In contrast, its smart consumer electronics products segment, which includes iPhones, represented 29 percent of the total revenue. “AI-related business performance will continue to grow in the third quarter. Combined with ICT products entering their peak season in the second half of the year, we expect significant quarter-on-quarter growth and strong year-on-year growth,” said rotating CEO Michael Chiang. When enquired about the latest developments regarding Nvidia’s Vera Rubin server products produced by Foxconn, Chiang indicated that preparations for mass production of the AI server racks are set to commence in the third quarter, with shipments anticipated to start in the fourth quarter. He noted, “We expect production volumes to increase gradually over the next several quarters, and it (Vera Rubin) will become our major product next year,” he said. While customer demand remains very strong, Chiang cautioned that the key determinant for the overall AI server rack market next year will be how much CoWoS capacity chip companies are able to secure.
Foxconn’s clientele, which includes Nvidia, is significantly dependent on the production capabilities of Taiwan’s TSMC, recognised as the preeminent contract chip manufacturer globally. CoWoS, or Chip on Wafer on Substrate, represents a significant advanced packaging technology pioneered by TSMC, particularly relevant in the context of AI chip manufacturing, which is currently facing capacity constraints due to surging demand in the AI sector. “The market currently expects CoWoS capacity to grow by more than 50 per cent next year, but how much of that can ultimately be translated into shipments of next-generation AI server racks will depend on chip supply,” Chiang said. Foxconn anticipates that its capital expenditure will persist in its upward trajectory, projecting a 30 percent rise in 2026 compared to the previous year.
In July, Foxconn announced a 40 percent year-on-year increase in second-quarter revenue. Most of the iPhones manufactured by Foxconn for Apple are assembled in China; however, the majority of those sold in the United States are now produced in India. The company is expanding its manufacturing capabilities by establishing factories in Mexico and Texas to produce AI servers for Nvidia. Foxconn has also been seeking to broaden its presence in the electric vehicle sector. The company’s shares have risen 17 per cent so far this year, lagging behind the broader Taiwan index’s 57 per cent gain. Foxconn shares concluded the trading session on Wednesday with an increase of 2.7 percent, prior to the announcement of earnings.
