Apple supplier Foxconn, the world’s largest contract electronics manufacturer, has taken an optimistic stance for the year ahead. In a surprising shift from previous expectations, the company anticipates a significant surge in revenue driven by the soaring demand for artificial intelligence (AI) servers.
Strong Demand for AI Servers
During an online earnings conference, Foxconn Chairman Young Liu revealed that they are witnessing robust demand for AI servers from their clients. The AI server market is projected to grow by approximately 30% annually between 2023 and 2025, and Foxconn aims to match or even exceed this growth rate. Liu confidently predicts revenue growth of over 40% for the company in 2024.
Foxconn’s financial performance in the fourth quarter of 2023 exceeded expectations. Net profit soared by an impressive 33%, marking the strongest year-on-year growth for a quarter since March 2021. The company’s success can be attributed to AI server demand and better-than-expected sales of cloud and networking products and smart consumer electronics.
Apple’s Influence
Apple, another tech giant, has also played a role in Foxconn’s positive outlook. The Cupertino-based company reported sales and profits that surpassed Wall Street estimates, driven by iPhone business growth. Although Apple’s China sales fell short of analysts’ predictions, its overall performance contributed to Foxconn’s success.
In the fourth quarter, consumer electronics (including smartphones) accounted for 58% of Foxconn’s revenue, while cloud and networking products (including servers) contributed 20%. This diversification positions Foxconn well for continued growth.
Despite the upbeat forecast, Foxconn remains cautious. First-quarter revenue is expected to be lower than in the same period last year, when sales surged after pandemic restrictions eased in China. Chief Financial Officer David Huang emphasized that capital expenditure growth in 2024 would at least match last year’s rate. The company’s strategic investments in areas such as electric vehicles and semiconductors contribute to its forward-looking approach.
Foxconn’s bullish outlook underscores AI servers’ pivotal role in the tech industry’s evolution. As demand continues to rise, the company’s adaptability and diversification will be crucial for maintaining its upward trajectory.
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