Foxconn predicts its AI server business will at least double in the second half of this year, making the world’s largest contract electronics maker — best known for making iPhones — the latest in the rapid rise of generative artificial intelligence systems such as ChatGPT. beneficiaries.
“We can see triple-digit growth in artificial intelligence servers in the second half of the year,” Foxconn Chairman Liu Yang said at the company’s annual meeting on Wednesday. Demand for processors in such servers has propelled chip designer Nvidia to become the most valuable semiconductor company, with its market capitalization briefly surpassing the $1 trillion mark on Tuesday.
The rapid adoption of generative AI systems such as ChatGPT and users’ growing reliance on them is driving demand, Liu said.
While Foxconn is best known as Apple’s largest manufacturing partner, the conglomerate also produces a raft of other electronics and components, from computers and industrial robots to electric vehicles and semiconductors. Along with rivals like Quanta Computer, it also makes most of the servers sold by brands like Dell, as well as directly for big data center users like Google and Amazon.
Of Foxconn’s NT$6.6 trillion (US$215 billion) revenue last year, NT$1.1 trillion came from manufacturing servers, of which Foxconn has a 40% global market share and 20% of its server business comes from AI.
Liu’s forecast for the year comes just a week after Nvidia raised its revenue forecast due to the exponential growth in the data center capacity needed to train AI systems. Nvidia forecast $11 billion in sales for the three months through July, more than 50% more than analysts had expected — an upward revision that helped it reach a trillion-dollar valuation this week.
TSMC, the world’s largest contract chipmaker, has also been talking about “structurally higher demand,” partly due to growth driven by artificial intelligence.
Foxconn’s upbeat forecast contrasts sharply with a very cautious overall outlook. Liu reiterated his earlier forecast that revenue in 2023 would be flat compared to last year due to the lack of visibility caused by inflation and geopolitical tensions weighing on the global economy.
Because electronic manufacturing service providers such as Foxconn focus on assembling tech products and making a range of low-end components, they have received far less revenue from the AI server boom than chip designers such as Nvidia.
Assembly and testing account for just $495 of the $10,424 cost of Intel’s Sapphire Rapids AI server, according to chip research group SemiAnalysis. Other components made by Foxconn, such as connectors, chassis, cooling systems and motherboards, are also minor parts of the AI server’s bill of materials.
“But as you know, our footprint is very extensive,” said a person close to Foxconn. “So, if you add it all up, there’s a lot of momentum.”