(Bloomberg) -- Nvidia Corp.’s Taiwan hardware partners Hon Hai Precision Industry Co. and Quanta Computer Inc. are forecasting a boom in AI server demand to continue into next year.
Key iPhone assembler Hon Hai, also know as Foxconn, and MacBook assembler Quanta reported earnings ahead of expectations on Thursday, thanks to a global rollout in AI-supporting data centers.
Hon Hai and Quanta, two of the world’s biggest assemblers of servers that house Nvidia’s AI accelerators, sought to tamp down concerns that data center spending may soon decelerate. Dutch chip tool maker ASML Holding NV echoed the bullish sentiment, reaffirming its long-term revenue outlook for AI chip demand.
Hon Hai expects AI server sales to make up 50% of its total server business in 2025. Cloud products, aided by the AI server boom, would become a pillar of growth for the company next year and match its mobile phones in sales, Chairman Young Liu told analysts. Sales of conventional servers would also continue to grow, as those are also necessary in data centers, he said.
The company is seeing “crazy” demand for servers with Nvidia chips, Liu said, following similar comments by Jensen Huang. He told Bloomberg TV in October the company was boosting server production capacity to meet demand.
AI-driven demand is making up for a slowdown in Hon Hai’s mainstay mobile phones. The company now sees a decline in 2024 in its smart consumer electronics segment, which includes iPhones, revising down a previous forecast for flat growth.
What Bloomberg Intelligence Says
Hon Hai’s sales growth could accelerate in 2024-25 as the proliferation of AI emerges as the company’s key growth engine and iPhone demand stabilizes. Its vertical integration and global footprint put it in a favorable position as AI server complexity increases and demand for local production rises.
— Steven Tseng and Sean Chen, analysts
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Hon Hai and Quanta are among the Taiwanese companies that have benefited from an AI infrastructure buildout by cloud service providers including Microsoft Corp., Alphabet Inc., Meta Platforms Inc. and Amazon.com Inc. Those four US firms are set to spend more than $200 billion this year on hardware geared to develop AI.
Hon Hai’s net income in the September quarter came to NT$49.3 billion ($1.5 billion), versus an average estimate of NT$45.7 billion. Quanta posted net income of NT$16.6 billion for the same period, compared with an estimate of NT$14.5 billion.
Quanta expects its capital expenditure to remain elevated at about NT$12 billion in 2025 to meet AI server demand. The company forecasts triple-digit growth in AI server sales next year. Its board has approved a $230 million capital injection into its US subsidiary to expand AI server production capacity there.
“The recent capex guidance from top US hyperscalers also confirmed their aggressive spending on AI in 2025, all from a high base in 2024,” Quanta’s Deputy Spokeswoman Carol Hsu told analysts in a call on Thursday. Such companies “are more concerned about under-investment, rather than over-investment.”
Still, US President-elect Donald Trump’s threat to impose stiff tariffs on Taiwanese contract manufacturers is weighing on the sector. The first Trump administration spurred companies to diversify their manufacturing bases, a trend that has since continued. Hon Hai has shifted some iPhone production to India, although the bulk of its production remains in China.
--With assistance from Mayumi Negishi.
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