Hon Hai's AI business continues to prosper; cloud network revenue will account for 60% in 3 to 5 years

Hon Hai held a corporate briefing today. Chief Financial Officer Huang Decai (from left), Chairman Liu Yangwei, and spokesperson Wu Junyi were optimistic that demand for artificial intelligence infrastructure would continue to expand.

Hon Hai (2317) held a corporate briefing today. Chairman Liu Yangwei is optimistic that demand for artificial intelligence (AI) infrastructure will continue to expand. AI cabinet shipments are expected to maintain high double-digit growth in 2027, and the group's full-year earnings are also confident of maintaining double-digit growth. As cloud service providers (CSPs) continue to expand capital expenditures, Hon Hai's cloud network products account for 54% of revenue, and are expected to further increase to more than 60% in the next 3 to 5 years.

Liu Yangwei expects that the global industry will continue to show K-shaped development in 2027. AI-related industries will benefit from global computing power demand and infrastructure investment, and their growth momentum will remain strong. Other information and communication (ICT) products may be affected by tight memory supply and rising component costs, and their performance will be relatively mixed. Among them, cloud network products are still the group's main growth driver, consumer smart products are expected to be relatively stable, and the personal computer (PC) market remains cautious.

Spokesperson Wu Junyi said that the new generation of AI cabinets has begun to be shipped. With the improvement of automation, the production yield has reached a high level, and the market share of the new generation cabinets has increased compared with the previous generation. AI cabinet shipments are expected to increase by double digits in the fourth quarter, driving AI server revenue to continue to increase quarterly. Looking forward to 2027, large CSPs will still be the main customers and are expected to join more emerging cloud players (Neo Cloud) to further increase the AI ​​server market share.

In terms of AI server product layout, Liu Yangwei observed that in the third quarter, customized chip (ASIC) AI server shipments increased by about 1.5 times year-on-year, which is higher than the approximately 70% growth rate of graphics processor (GPU) AI servers. As the demand for AI inference expands, ASICs are expected to grow faster. Hon Hai also continues to cooperate with major CSP customers, covering motherboards, power supplies, liquid cooling, high-speed interconnection and cabinet integration.

Liu Yangwei further mentioned that some ASIC businesses adopt a consignment model (Consignment), where customers provide chips, so the related chip costs are not included in Hon Hai's revenue. Although the revenue proportion may be lower than the shipment volume, it helps reduce working capital requirements and improve capital utilization efficiency.

In terms of profitability, Hon Hai continues to deepen vertical integration. Liu Yangwei mentioned that the group's component business scale has expanded from about 1.3 trillion yuan last year to more than 1.6 trillion yuan this year, and related business profit margins exceed 15%. It will continue to increase the ratio of self-made and supplied components to strengthen overall profitability.