(Bloomberg) -- Apple Inc.’s main manufacturing partner Hon Hai Precision Industry Co. said it expects revenue to grow in the current quarter and for the rest of year, after reporting a profit rise boosted by demand for servers powering AI applications.
The iPhone producer, also known as Foxconn, said on Wednesday that net income in the June quarter was NT$35 billion ($1.1 billion), largely in line with analyst expectations. Hon Hai’s revenue for the period, released earlier, surpassed estimates and came in at NT$1.55 trillion, up 19%. This was helped in large part by its growing business of supplying data center operators with servers containing Nvidia Corp.’s AI accelerators.
Hon Hai has set itself the goal of securing 40% of the global AI server market, relying on its close relationships with many of the world’s biggest tech companies and depth of manufacturing expertise. The company’s shares are up close to 80% this year as investors have bought into the artificial intelligence pitch. Earlier this month, compatriot Taiwan Semiconductor Manufacturing Co. said its July revenue rose 45%, outpacing estimates for the quarter and suggesting that AI demand remained robust.
What Bloomberg Intelligence Says
Given the global increase in AI applications, AI servers are likely to become Hon Hai’s key growth engine given its strong partnership with Nvidia. Its robust logistics and manufacturing capability could keep its iPhone assembly share above 50% even as Apple diversifies suppliers, but further ratings upgrade may be capped by low single-digit margins.
— BI analyst Cecilia Chan
Shipments of the iPhone in China have in recent months reversed a slump from the start of the year, and the global smartphone market is accelerating its growth. Hon Hai, much like TSMC, benefits from any upsurge in consumer electronics demand, and the addition of AI features and enhancements is widely seen as a catalyst driving users to upgrade their devices.
Hon Hai’s July sales jumped 22% thanks to AI server sales, and the company’s Wednesday report indicated it expects growth across most of its business segments in the current quarter. The company expects strong growth from its cloud, networking and components groups, while smart electronics — iPhones included — are set to be roughly flat for the full year.
(Updates with outlook from Hon Hai’s statement)
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