Foxconn & Teco Alliance Boosts AI Hardware Development
Taipei, Taiwan – Hon Hai Precision Industry Co., better known as Foxconn, a key manufacturing partner for Nvidia and Apple, has announced a significant strategic alliance with Taiwan’s Teco Electric & Machinery Co. aimed at bolstering its push into artificial intelligence (AI) hardware. The partnership, revealed on Wednesday, July 30, 2025, involves a share exchange designed to enhance both companies’ AI infrastructure capabilities and position them competitively in the global supercomputing landscape.
Under the terms of the agreement, Teco will acquire a 0.519% stake in Foxconn, while Foxconn will obtain a 10% stake in Teco. This no-cash transaction, which is subject to regulatory approvals, is anticipated to conclude in the fourth quarter of this year. The alliance combines Foxconn’s extensive experience as the world’s largest electronics manufacturing service provider and a leading AI server producer with Teco’s established leadership in industrial electro-mechanical engineering and green energy innovation.
The strategic collaboration is primarily focused on seizing opportunities in the rapidly expanding global AI data center (AIDC) market, which is seeing a trend towards standardization and modularization. Together, Foxconn and Teco plan to offer comprehensive modular data center products, electromechanical engineering services, and cost-competitive, one-stop solutions to global customers, including Tier-1 cloud service providers (CSPs) and hyperscalers. Target markets for this alliance include Taiwan, Asia, the Middle East, and the United States. Notably, Teco-Westinghouse, Teco’s Texas-based subsidiary specializing in electric motors, along with Foxconn’s existing U.S. manufacturing base, aligns with the companies’ strategic goal of expanding U.S. manufacturing and reshaping global supply chains.
This partnership underscores Taiwan’s pivotal role in the global AI supply chain. Taiwan is already a critical hub for AI hardware, with an estimated 90% of global AI server production capacity concentrated on the island by 2025. Foxconn has been actively expanding its AI server manufacturing capabilities, forecasting its AI server sales to exceed NT$1 trillion (approximately US$33.03 billion) in 2025, driven by strong global demand. The company has reported over 50% year-on-year growth in AI and general server revenue for Q1 2025 and plans to deliver AI servers featuring Nvidia’s GB series GPUs to North American cloud providers in Q2.
Foxconn’s commitment to AI extends beyond hardware manufacturing. The company is collaborating with Nvidia and the Taiwanese government to build an “AI factory” supercomputer in southern Taiwan through its subsidiary, Big Innovation Company. This AI factory, featuring 10,000 Nvidia Blackwell GPUs, aims to provide state-of-the-art AI computing infrastructure to researchers, startups, and various industries in Taiwan. The initiative aligns with Taiwan’s broader “Ten Major AI Infrastructure Projects,” which seek to generate over NT$15 trillion (US$510.86 billion) in economic value by 2040 by leveraging the nation’s ICT sector and semiconductor manufacturing prowess to become a global AI leader. These projects prioritize silicon photonics, quantum technology, and AI robotics, with industry groups, including one led by Foxconn Chairman Young Liu, supporting the local development of AI robotics and related ecosystems.
Furthermore, Foxconn has been investing in its in-house generative AI platform, FoxBrain, which is being deployed to optimize factory operations, assist workers in real-time, and potentially automate up to 80% of basic production tasks. The company plans to expand FoxBrain’s application to electric vehicles and smart city infrastructure.
The collaboration between Foxconn and Teco highlights a growing trend of strategic alliances within the AI infrastructure manufacturing market, projected to reach $48 billion with a compound annual growth rate of 46.5% from 2025 to 2030. This partnership positions both companies to offer a differentiated value proposition in the market, particularly for customers prioritizing cost efficiency and integrated solutions.