Foxconn Q1 sales jump on AI server demand, flags risks

Foxconn, the Taiwanese electronics manufacturer also known as Foxconn, posted NT$2.13 trillion (US$66.7 billion) in revenue for the quarter ended March, up 29.7% year on year and slightly below analyst estimates of NT$2.14 trillion (US$67 billion), as demand for AI servers remained firm.

The company assembles Nvidia-based servers, making it a key beneficiary of rising AI infrastructure spending by US tech firms.

Foxconn expect sales keep rising both quarter on quarter and year on year in the current quarter, but it warned that conflict in the Middle East, and wider political and economic volatility could affect business conditions.

🔗 Source: Bloomberg

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Hon Hai’s AI boom sits alongside profit pressure and a consumer electronics slowdown

Revenue rose, yet net income for the quarter ended December fell short of forecasts at NT$45.2 billion (US$1.41 billion) versus an expected NT$59.9 billion (US$1.87 billion) 1.
Higher taxes weighed on results after Hon Hai subsidiaries repatriated earnings to Taiwan 2.
Growth remained concentrated in a few lines. AI server revenue more than doubled in the September quarter, helping cover weaker demand for consumer electronics such as iPhones and MacBooks 3.
Hon Hai also said margins have come under strain from a long memory chip shortage. Memory chips are semiconductors used to store and access data, and they go into smartphones, PCs, and servers 4.

The Red Sea crisis adds a physical chokepoint to the digital AI boom

Hon Hai warned that uncertainty in the business environment could rise because of the Middle East crisis 4.
Houthi rebel attacks disrupted Red Sea shipping. Hundreds of vessels avoided the Suez Canal and rerouted around southern Africa, adding roughly 4,000 miles to each trip 5.
Some key routes saw shipping costs jump nearly five-fold. J.P. Morgan Research (the research arm of investment bank JPMorgan Chase) estimated the increase could add 0.7 percentage points to global core goods inflation, plus 0.3 percentage points to overall core inflation, in the first half of 2024 if higher costs persist 5.
For tech firms, AI server hardware supply chains can face pricier delays and more inflation pressure. That adds momentum to efforts to rethink sourcing, and some policymakers and businesses have pushed to onshore or near-source production after similar shocks 6.