Foxconn's AI Pivot: iPhones No Longer Most Important Business

The global technology landscape is undergoing a profound metamorphosis, and perhaps no single development encapsulates this shift more vividly than Foxconn’s strategic pivot. The Taiwanese manufacturing giant, long synonymous with the production of Apple’s iconic iPhones, has officially seen its cloud and networking products division, primarily driven by AI servers, surpass its smart consumer electronics segment in revenue. This pivotal moment, confirmed by Foxconn’s Q2 2025 financial results, signals a decisive entry into the artificial intelligence era, redefining the company’s core identity and setting a new trajectory for the broader tech industry.

For nearly two decades, Foxconn’s fortunes were inextricably linked to Apple’s iPhone. The sheer scale of iPhone assembly cemented Foxconn’s position as the world’s largest contract electronics manufacturer, enabling Apple to meet unprecedented global demand. However, as the smartphone market matured and demand growth for new iPhones began to slow, analysts and Foxconn’s leadership recognized the inherent risks of over-reliance on a single product category.

Under the stewardship of Chairman Young Liu, who took the helm in 2019, Foxconn embarked on an ambitious diversification strategy, emphasizing investments in emerging sectors such as electric vehicles (EVs), semiconductors, and, crucially, AI servers. This foresight has paid dividends, positioning the company to capitalize on the explosive demand for AI computing power years before the generative AI boom truly took hold.

The numbers tell a compelling story: In the second quarter of 2025, Foxconn’s cloud and networking business accounted for 41% of its total revenue, comfortably outpacing the 35% contributed by consumer electronics. This is a dramatic reversal from just two years prior, when consumer electronics represented 54% of the company’s income. The AI server market itself is experiencing exponential growth, with its value projected to reach US$298 billion in 2025, making up over 70% of the entire server industry’s value. Global shipments of high-end AI servers are expected to surge from 639,000 units in 2024 to 1.323 million units in 2025. Foxconn’s early and aggressive bets have allowed it to capture a significant share, now holding nearly 40% of the market for both general-purpose and AI servers. The company anticipates an astounding 170% year-on-year growth in AI server revenue for the third quarter of 2025, with full-year revenue from this segment forecast to exceed NT$1 trillion ($33 billion). Moreover, the gross margins for AI infrastructure are reportedly 10-15% higher than those from traditional consumer electronics, providing a powerful financial incentive for this strategic shift.

Central to Foxconn’s AI server success is its deepening partnership with NVIDIA, a leader in AI graphics processing units. Foxconn is not merely assembling; it is providing the critical infrastructure. The company’s subsidiary, Big Innovation Company, has become Taiwan’s first NVIDIA Cloud Partner, establishing an “AI factory” supercomputer in Taiwan featuring 10,000 NVIDIA Blackwell GPUs to expand AI computing availability for researchers and enterprises. Beyond Taiwan, Foxconn is expanding its AI server manufacturing footprint globally, with plans to build new facilities in Houston, Texas, and Mexico, aligning with NVIDIA’s substantial U.S. investment plans. The company is also revitalizing its Ohio site to produce cloud and networking products, including AI servers, as part of a $735 million investment in a new U.S.-based venture dedicated to data center modules and server assembly.

While AI servers now take center stage, Foxconn’s relationship with Apple remains significant, albeit evolving. Foxconn continues to be a crucial partner in Apple’s efforts to diversify its supply chain beyond China, with substantial investments in new iPhone manufacturing facilities in India. For instance, Foxconn’s Tamil Nadu facility is scaling up to produce iPhone 17 components and assemble older models, contributing to over 30% of new iPhones being assembled in India in 2025.

This transformation at Foxconn mirrors a broader trend across Taiwan’s technology sector, where manufacturers are increasingly leveraging their precision engineering expertise to pivot from traditional consumer electronics to the burgeoning fields of AI, cloud computing, and data center infrastructure. Taiwan now accounts for a staggering 80% of global server shipments and over 90% of AI server production, underscoring its critical role in powering the AI revolution. As the world moves beyond the mobile-first paradigm, Foxconn’s calculated leap into AI servers positions it not just as a contract manufacturer, but as a foundational architect of the next technological age.