TAIWAN: Taiwan’s Foxconn, formally known as Hon Hai Precision Industry, reported a 13% drop in net income to NT$46.3 billion (S$1.88 billion) for the last quarter, missing analysts’ expectations of a 2.3% rise to NT$54.4 billion (S$2.20 billion) as weak iPhone sales in China impacted its business.
According to the South China Morning Post (SCMP), while the company’s server manufacturing business has grown with the rising demand for Nvidia’s artificial intelligence (AI) chips, most of its revenue still come from iPhones.
Apple saw an unexpected drop in sales of its flagship device during the holiday quarter, affecting Foxconn’s overall performance.
Last year, Foxconn’s August revenue surged 33% due to rising demand for AI servers. In November, it reported a 14% rise in quarterly profits for the July to September period.
Despite maintaining its 2024 forecast of “significant” sales growth and projecting AI servers to make up 50% of its total server revenue in 2025, the company reported a December-quarter slowdown in January
Major tech companies like Microsoft and Amazon are still investing in data centres, but the rise of Chinese start-up DeepSeek has raised doubts about whether such hefty investments are necessary.
According to Reuters, Foxconn’s shares have fallen 8.7% so far this year due to concerns over US tariffs and trade policy. With major manufacturing operations in China and Mexico, the company faces uncertainty as tariffs rise.
Bloomberg Intelligence analysts Steven Tseng and Sean Chen noted that sales may have slowed in the fourth quarter due to a model transition but could improve in the first quarter. They added that AI-driven demand for personal computers and early orders ahead of tariff changes could strengthen the computing segment. Meanwhile, the component business likely remained stable, with growth in the automotive unit and increased vertical integration. However, weaker iPhone sales in China may have hurt the smart consumer electronics division.
“Hon Hai’s profit could jump on rapid sales growth, but gross margin might be diluted due to lower profitability of high-price AI servers,” they added.
For now, analysts expect AI demand to boost Foxconn’s revenue in 2025. Sales in the first two months of this year climbed 25%, growing faster than last year. This reflects Nvidia’s US$11 billion quarterly revenue from its Blackwell chip, which the company described as its “fastest product ramp”.
Hon Hai has been increasing its US investments to boost AI server production.
Last month, Apple announced a partnership with Foxconn to manufacture servers for Apple Intelligence in Houston. Meanwhile, the company is also building what it calls the world’s largest AI server assembly plant in Mexico. /TISG
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