Foxconn’s Shenzhen-based subsidiary to ‘exclusively’ supply Apple with AI servers made in Vietnam: report

Shanghai-listed Foxconn Industrial Internet has also supplied its servers to Amazon Web Services, ChatGPT creator OpenAI and chip maker Nvidia
The reported Apple server deal could see greater speculation about not just the supply chain shift outside China, but also the US giant’s AI goals

Foxconn

Dylan Butts

Published: 7:00pm, 8 Aug 2023

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Foxconn Industrial Internet (FII), the Shenzhen-based subsidiary of Foxconn Technology Group, will “exclusively” supply Apple with made-in-Vietnam servers for training and testing artificial intelligence (AI) services, according to a report by Taiwan’s Economic Daily News, as the world’s most valuable company continues to diversify its manufacturing supply chain away from China.

Foxconn, the world’s largest electronics contract manufacturer and Apple’s primary assembler of iPhones, is also the US technology giant’s biggest supplier of servers used in its data centres, according to the report, which cited sources and published on Monday. It also said that Foxconn, formally known as Hon Hai Precision Industry, accounted for about 43 per cent of the global server market.

The reported deal with Apple would represent another high-profile order for Foxconn’s Shanghai-listed unit FII, which has seen its shares on a wild price swing amid speculation that an acceleration of AI investments would boost demand for its products including servers.

FII, according to the report, has also supplied its servers to cloud computing giant Amazon Web Services, ChatGPT creator OpenAI and Nvidia, the world’s most valuable chip maker.

Headquartered in Shenzhen, Foxconn Industrial Internet is an international supplier of servers and storage systems used by cloud computing services providers and large enterprises. Photo: Handout

Apple and Foxconn did not respond to a request for comment on Tuesday.

Shares of FII closed 3.2 per cent lower at 24.18 yuan (US$3.36) on Tuesday in Shanghai.

News of FII’s latest server supply deal could see increased speculation about not just Apple’s manufacturing supply chain shift outside China, but also over the AI ambitions of the iPhone maker.

Apple has been working on its own ChatGPT-like generative AI tool called Apple GPT, according to a Bloomberg report last month. Generative AI tools are algorithms that can be used to create new content, including audio, code, images, text, simulations and videos.

During Apple’s quarterly earnings call last week, chief executive Tim Cook confirmed that the company has for many years been researching various AI technologies, including generative AI. He did not elaborate.

“We view AI and machine learning as core fundamental technologies that are integral to virtually every product that we build,” Cook said. He indicated that AI has already been used in the development of Apple’s products and operating systems.

FII’s reported AI server supply deal with Apple would appear to bolster the optimism expressed by Foxconn chairman and chief executive Liu Young-way on demand for AI servers during the company’s first-quarter earnings call.

Liu said Foxconn’s server revenue already reached NT$1.1 trillion (US$34.6 billion) last year.

The Taiwanese firm, meanwhile, has continued to invest in expanding its electronics contract manufacturing capabilities outside China.

Foxconn recently signed a letter of intent to invest more than US$600 million in India for a new FII smartphone enclosure production and a separate semiconductor equipment project, according to a social media statement from a senior official of the country’s southwestern state of Karnataka.

That followed Foxconn’s exit in July from a US$19.5 billion semiconductor joint venture deal in Mumbai with local oil and metals conglomerate Vedanta. Foxconn later pledged to find a new partner for its India chip plan.

In Vietnam, Foxconn is manufacturing iPads and AirPods at a US$300 million factory that was built last year.

There were at least 25 factories in Vietnam that provided a range of manufacturing services for Apple, according to the US company’s supplier list for 2022.

Separate from its Apple business, Foxconn has also moved to diversify its supply chain and other businesses in Vietnam. The company’s investment plans in Vietnam include projects related to the production of components for electric vehicles, according to a report from Reuters last month.