Foxconn sees a significant shortage of AI chips impacting server business

The Chairman of Hon Hai — known as Foxconn in the West — is concerned about a lack of supply of AI-ready chips for the server market.

Speaking at the company’s annual Lunar New Year dinner, Chairman Young Liu said he expects the AI chip shortage to persist in 2024, with recovery hinging on new fabs opening up and a stable geopolitical environment.

Liu also said he predicts a slight increase in Hon Hai’s performance year-over-year, which is being held back by a lack of chip supply. The company previously gave conservative and neutral expectations for 2024.

While Hon Hai is best known as Apple’s contract manufacturer for the iPhone, the firm manufactures PCs, components, and servers for a variety of companies.

Overall, it holds approximately 43% of the global server market share, according to Digitimes Research. Last year, Liu said that sales of AI servers are expected to hit $150 billion by 2027, which is larger than the predicted size of the entire server market for 2025.

In earnings calls, executives from Hon Hai said they expect the Cloud and Networking Products division to be one of its main growth drivers for 2024 because of the strong demand for AI servers.