Hon Hai Precision Industry, known as Foxconn, reported a quarterly performance that fell short of expectations. Sluggish iPhone sales in China and increased investments in producing AI servers weighed on earnings.
The company, an important assembler of Nvidia servers, posted a 13% fall in net income to NT$46.3 billion ($1.4 billion), missing estimates for a 2.3% rise to NT$54.4 billion($1.6 billion).
Hon Hai is investing heavily in manufacturing AI servers, driven by skyrocketing demand for Nvidia chips that power artificial intelligence. However, the company remains heavily dependent on iPhone production, and an unexpected dip in Apple’s holiday-quarter sales left its bottom line under pressure.
Hon Hai faces sales slowdown amid AI disruptions and looming US tariffs
In January, Hon Hai warned of weaker December-quarter sales. Microsoft and Amazon recently continued building data centers. Still, the emergence of Chinese AI startup DeepSeek—which is said to have achieved incredible growth through the efficient use of relatively inexpensive hardware—prompted questions about the sustainability of construction efforts.
Hon Hai, a major electronics exporter in its vast Chinese factories, is also facing uncertainty over potential tariffs from the United States, which are set to be introduced in 2025.
“Sequential growth may have slowed in the fourth quarter due to a model transition, but could pick up again in the first quarter,” Bloomberg Intelligence analysts Steven Tseng and Sean Chen said.
They added that AI-enhanced demand for personal computers and the need to place orders ahead of tariff increases may have bolstered Hon Hai’s computing segment. At the same time, its automotive unit and vertical integration efforts would have underpinned component sales. However, tepid Chinese demand for iPhones tempered performance at the smart consumer electronics business.
Hon Hai expands AI investments to challenge Nvidia’s growth in 2025
Analysts maintain a bright view of AI’s contribution to Hon Hai’s income in 2025. The company’s sales rose 25% during the first two months of the year, putting it on course to match Nvidia’s remarkable $11 billion in quarterly sales on its latest Blackwell chip—the fastest the company has ever ramped a product.
Hon Hai Chairman Young Liu said his company wasn’t seeing a slowdown in AI server demand from cloud service providers. The company has also increased its US investments in AI server production. In September, Apple said it would work with the company to build servers for Apple Intelligence in Houston. Liu said:
We are actively replicating our past experience of globalization and focusing on production in the US. We are in close contact with customers…to adjust our production capacity.
~ Young Liu
The company is also building the world’s biggest AI server assembly plant in Mexico, which will be its own factory.
The firm also assembles consoles for Nintendo Co., which is set to oversee the biggest game industry launch this year with the Switch 2. Analysts expect strong sales, even at a higher price than its predecessor.
While facing short-term challenges, Hon Hai‘s strategic leap toward AI infrastructure reflects long-term growth potential in the rapidly evolving tech landscape.
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