*

Foxconn's cloud, networking revenue tops consumer

electronics

for first time

*

Foxconn's AI server growth driven by early investments

*

Taiwan tech sector shifts focus from consumer electronics

to AI

servers

By Wen-Yee Lee

TAIPEI, Aug 18 (Reuters) - Taiwan's Foxconn,

which rose to become a global tech manufacturing juggernaut by

assembling millions of iPhones, can now say its main business is

no longer Apple ( AAPL ) as it takes advantage of the AI-boom to

diversify its income.

Its revenue from making AI servers and other cloud and

networking products, including for major customer Nvidia ( NVDA )

, surpassed smart consumer products such as iPhones for

the first time in the second quarter, marking the culmination of

a shift that began years ago and has swept through Taiwan's tech

industry.

Foxconn's heavy reliance on the smartphone business has long

been viewed by investors as a significant risk, as demand growth

for new iPhones has gradually weakened since they were first

introduced nearly two decades ago, leaving the top iPhone

assembler grappling with slowing sales momentum, analysts said.

Wary of the risk, Foxconn Chairman Young Liu has been

championing new businesses such as AI servers, electric vehicles

and semiconductors since taking the top job in 2019.

While its expansion into EVs and chips has yet to show a

meaningful contribution to its topline, Foxconn's success in AI

server manufacturing - the company is Nvidia's ( NVDA ) biggest server

maker - is the result of its early bets before the technology

was thrust into the limelight with the advent of ChatGPT in late

2022.

Consumer electronics accounted for 35% of Foxconn's total

revenue in the second quarter, while cloud and networking

business represented 41%. In 2021, consumer electronics

represented 54% of its revenue.

The firm's prudent wagers years back helped it cultivate a

now-prized relationship with the U.S. AI chip firm and other

major AI players, analysts said.

"The company has been in the business for years, meeting

higher quality requirements, diversifying assembly and

operations across sites, and pursuing vertical integration,"

said Ming-Chi Kuo, an analyst at TF International Securities.

Foxconn began producing reference designs for Nvidia's ( NVDA )

graphics cards around 2002 and started making general-purpose

servers for cloud service providers' data centres as early as

around 2009. Its AI server business with Nvidia ( NVDA ) is in many ways

the culmination of that history, analysts said.

Foxconn says it is now one of the world's largest suppliers

of both general-purpose and AI servers, with a market share of

nearly 40% in each.

The company has also shown a willingness to commit

investment to a project at an earlier stage than other

companies, Kuo said, citing its past investments for Apple ( AAPL ) and

similar moves for Nvidia ( NVDA ). "In long-term partnerships, Foxconn is

more willing to take the initiative," he said.

Foxconn's plan to build factories in Houston, Texas - part

of Nvidia's ( NVDA ) $500 billion U.S. investment plan - and in Mexico to

produce AI servers for the U.S. client underscores this

strategy, analysts said.

Foxconn now expects its AI server revenue would grow more

than 170% in the third quarter year-on-year.

Foxconn and Nvidia ( NVDA ) declined to comment. Apple ( AAPL ) did not

respond to request for comment.

BROADER SHIFT

The shift at Foxconn mirrors a broader trend in Taiwan's

technology sector, where companies once centred on consumer

electronics - such as Foxconn with iPhones, and Quanta Computer ( QUCCF )

and Wistron Corp ( WICOF ) with notebooks - are now

investing heavily in AI servers.

Nvidia ( NVDA ) partner Wistron's ( WICOF ) revenue for January to July rose

92.7%, while Quanta's grew 65.6% in the same period.

"The monthly sales jump for Taiwan ODMs in the first half of

2025 is evidence of this trend," said Robert Cheng, head of Asia

technology hardware research at BofA Global Research, referring

to original design manufacturers like Foxconn that contract

manufacture products for their clients.

Their fast transition into AI servers is also the result of

Taiwanese tech supply chain working closely with U.S. tech

giants on data centre infrastructure work for a decade now,

according to Chris Wei, industry consultant at Taiwan's Market

Intelligence & Consulting Institute.

He estimates Taiwan accounts for about 80% of global server

shipments and more than 90% of AI servers.

Cheng agrees.

"We think this shift toward AI servers, whatever form it

takes, is good for Taiwan's tech industry," he said, noting

Taiwanese firms' ability to rapidly shift to cater to changing

needs from their customers.