Hon Hai's AI Server Sales Soar, Offsetting Dwindling Phone Business

Taiwanese manufacturing giant Hon Hai Precision Industry Co. is strategically pivoting towards the burgeoning artificial intelligence sector, anticipating a substantial surge in server sales this quarter even as its traditional consumer electronics business faces headwinds. The move underscores the company’s increasing reliance on the AI boom to offset the volatile demand for products like Apple Inc.'s iPhones, which Hon Hai famously assembles.

The world’s largest contract electronics maker, Hon Hai, which also produces servers for Nvidia Corp., projects a remarkable increase in its AI-related revenue. For the current three-month period, the company forecasts a 170% rise in revenue specifically from servers engineered for artificial intelligence tasks. This dramatic growth is expected to contribute to an overall doubling of its server sales this quarter.

In stark contrast, Hon Hai executives have issued a cautionary outlook for their smart consumer electronics division. This segment, which includes the assembly of Apple’s flagship devices, is predicted to shrink throughout the year. The business faces multiple pressures, including a general slowdown in smartphone demand and the looming threat of potential US tariffs, which could further impact its profitability and market access.

Despite the challenges in its consumer electronics segment, Hon Hai recently reported a robust financial performance for the June quarter. The company’s net income for the period rose by a better-than-projected 27%, signaling its adaptability and the early benefits of its strategic diversification. This financial resilience, coupled with aggressive expansion into AI server manufacturing, positions Hon Hai to navigate the evolving technological landscape, shifting its core focus from the declining smartphone market to the explosive growth of artificial intelligence infrastructure.