(Bloomberg) — Apple Inc.’s main manufacturing partner, Hon Hai Precision Industry Co., reported a second straight month of single-digit sales growth, raising concerns that demand for AI infrastructure will be not able to compensate for low iPhone sales.
Most read on Bloomberg
Hon Hai, also known as Foxconn, is a key server assembly partner of Nvidia Corp. On Thursday, it reported revenue of NT$672.59 billion ($20.7 billion) for November, up 3.5 percent, after reporting an 8.6 percent increase for October. The sum of Hon Hai’s sales in October and November lags behind the trajectory suggested by analysts forecasting 13% growth for this quarter, according to Bloomberg News calculations.
Since the advent of ChatGPT, Hon Hai and other AI hardware providers have benefited from massive spending on servers and data centers by big tech companies, including Meta Platforms Inc. and Alphabet Inc.’s Google But investors are starting to question whether these expenses will be profitable, as a revolutionary AI application is still missing. Meanwhile, Apple is expected to have a quiet year.
In its latest earnings conference call, Hon Hai executives said they expected sales of its cloud business, including AI servers, to be about the same as those of phones in 2025. Apple sales historically accounted for more than 50% of Hon Hai’s overall sales.
US President-elect Donald Trump’s threat to impose harsh tariffs on Taiwanese contract manufacturers will weigh on the sector. The first Trump administration pushed companies to diversify their manufacturing bases, a trend that has continued since. Hon Hai has shifted some of its iPhone production to India, although the bulk of its manufacturing operations remain in China.
Hon Hai President Young Liu recently told reporters that the company’s new $33 million facility in Texas, an investment announced after Trump’s election, will make AI servers and that it expects tariffs to further harm competitors.
Most read from Bloomberg Businessweek
©2024 Bloomberg LP