*

Foxconn to invest $2-3 billion annually in AI over the

next 3-5

years -Liu

*

China's EV market faces fierce competition, consolidation

expected soon -Liu

*

Foxconn talking with Japan about AI, EV investments -Liu

By Daniel Leussink, Maki Shiraki and David Dolan

TOKYO, Nov 21 (Reuters) - Foxconn will invest $2 billion

to $3 billion a year in AI, the head of the world's largest

contract electronics maker told Reuters.

Foxconn Chairman Young Liu also said he expects a

shakeout in China's crowded electric-vehicle market "soon" and

that the company is talking with the Japanese government about

potential investments in artificial intelligence and EVs.

"For now, AI will be the majority of the investment," Liu

told Reuters on a visit to Tokyo earlier this month. Liu's

comments were embargoed until Friday, to coincide with the Apple ( AAPL )

supplier's annual Hon Hai Tech Day.

The investment in AI infrastructure and technology

development over the next three to five years means it will

account for more than half of Foxconn's roughly $5 billion in

annual capital expenditure, said Liu.

The Taiwanese company's cloud and networking business, which

includes AI servers, has surpassed consumer electronics for two

consecutive quarters, highlighting how quickly its revenue mix

is shifting.

Liu, who has led Foxconn since 2019, said China's EV sector

faces "very fierce competition" and forecast consolidation as

unprofitable startups disappear and government support wanes.

"They're not making money," Liu said, adding that government

support was too limited to support every EV maker in the world's

largest auto market. He said China's automotive landscape will

be "much more stable" once there is a period of consolidation.

The squeeze on EV makers in China is already evident. Top EV

maker BYD reported its biggest quarterly

profit drop in more than four years last month.

BYD faces growing competition from domestic rivals and slashed

its 2025 sales target to 4.6 million vehicles.

TALKING WITH JAPAN ON AI, EV INVESTMENT

Foxconn delayed its ambitious target to capture 5% of the global

EV market by 2025 in November last year, as the sector faces a

slowdown in demand worldwide.

But rather than losing faith in EVs, it is holding off on

ramping up investment until market conditions improve, with

potential plans to expand in EVs or other areas such as quantum

computing and robotics.

Foxconn is talking to Japan's government about possible

investments in EV or AI, Liu said, without giving details. He

added that local manufacturing of AI systems is critical for

data sovereignty.

Liu said the EV sector could become like the early personal

computer industry, where intense competition made in-house

production unsustainable and drove a shift to outsourcing.

Foxconn pioneered that model with Compaq Computer in the 1990s

the world's largest PC supplier. Liu said a similar dynamic is

emerging for EVs, with carmakers likely to outsource faster as

competition intensifies.

"Once they start outsourcing with one successful example,

the others will follow," he said. "That's exactly what we saw in

the PC market."

($1 = 31.1830 Taiwan dollars)