Foxconn reports modest sales growth amid iPhone demand concerns

Hon Hai (TW:2317 ) Precision Industry Co., widely known as Foxconn (SS:601138 ) and a prominent partner of Apple Inc (NASDAQ:AAPL )., has reported a second month of single-digit sales growth. This trend has sparked concerns over whether the demand for AI infrastructure will be sufficient to balance the weaker sales of iPhones.

On Thursday, Foxconn disclosed a November sales figure of NT$672.59 billion ($20.7 billion), marking a 3.5% increase. This follows an 8.6% rise in October. However, the combined sales for October and November are falling short of the 13% growth anticipated for this quarter, based on analyst expectations reported by Bloomberg News.

The surge in artificial intelligence technology, particularly since the introduction of ChatGPT, has led to increased revenue for AI hardware providers like Foxconn. The company has benefited from significant investments in servers and data centers by major tech corporations such as Meta Platforms Inc (NASDAQ:META ). and Google (NASDAQ:GOOGL ).

Despite this, the investment community is expressing doubts about the long-term profitability of these expenditures, given the current absence of a definitive AI application that could drive further growth. Concurrently, projections for Apple's performance in the coming year suggest a period of limited expansion.

During the most recent earnings call, Foxconn's executives forecasted that by 2025, the revenue from its cloud and AI server business would align with its smartphone segment. Historically, Apple has represented more than half of Foxconn's total sales.

The manufacturing sector in Taiwan is also facing potential challenges from US trade policy. The incoming administration of President-elect Donald Trump has indicated the possibility of imposing significant tariffs on Taiwanese contract manufacturers.

This threat echoes the actions of Trump's first term, which prompted companies to diversify their production locations. In response, Foxconn has transferred some of its iPhone manufacturing to India, although China continues to host the majority of its operations.

Foxconn Chairman Young Liu commented on the company's recent $33 million investment in a Texas facility, which will be dedicated to manufacturing AI servers. Liu suggested that any tariffs imposed are likely to affect Foxconn's competitors more severely than the company itself. The Texas investment was initiated following the election of President Trump, signaling the company's ongoing strategy to mitigate tariff impacts by expanding its manufacturing presence in the United States.

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Source: Investing.com