Hon Hai Precision Industry Co (鴻海精密) yesterday said it expects strong revenue this quarter and for the whole year, driven by robust demand for artificial intelligence (AI) servers.
Although the first quarter is typically the off-season for the information and communications technology industry, revenue is expected to outperform the same period over the past five years on strong server shipments, Hon Hai chairman Young Liu (劉揚偉) told investors.
Server shipments this quarter are expected to grow by a high double-digit percentage sequentially, Liu said, adding that the company accounts for more than 40 percent of the global AI server market.
Photo: screen grab from the Internet
The company's AI server rack shipments are also expected to grow at a "high double-digit" pace sequentially this quarter, Liu said. This year as a whole, AI server rack shipments could double from a year earlier, he said.
About 80 percent of Hon Hai’s servers are based on AI graphics processing units, while the remaining 20 percent use AI application-specific ICs, he said.
Healthy demand for AI hardware helped Hon Hai achieve record profit and revenue last year, with annual net profit growing 24 percent to NT$189.35 billion (US$5.93 billion), or earnings per share (EPS) of NT$13.61. Annual revenue rose 18 percent to NT$8.1 trillion, even though net profit last quarter slipped 2 percent annually to NT$45.21 billion and EPS decreased to NT$3.23 from NT$3.34 a year earlier.
The company attributed the decline in profit last quarter to higher tax expenses related to the repatriation of profits from overseas subsidiaries.
However, Hon Hai — which is Apple Inc’s primary iPhone assembler and makes servers powered by Nvidia Corp’s AI accelerators — said growth momentum in AI servers this year would remain solid as major cloud service providers continue to increase capital expenditures for AI infrastructure, Liu said.
The company is also optimistic about its general-purpose server business as AI development boosts demand for storage and computing, he said.
This quarter, the company expects strong growth in its cloud and networking products business, as well as its smart consumer electronics business — mainly smartphones — on the back of new product launches, he said.
Revenue from other segments — such as connectors, camera modules and auto parts — is also projected to post significant revenue growth as shipments increase, Liu said.
While Hon Hai’s computing business is likely to be largely spared from the impact of memory shortages due to its focus on high-end models, the segment is still expected to see revenue decline this quarter as the broader PC market remains subdued, he said.
Last quarter, cloud and networking products accounted for 42 percent of Hon Hai’s quarterly revenue of NT$2.6 trillion, up from 26 percent a year earlier. Smartphones made up 39 percent, down from 51 percent a year earlier.
It was the first time revenue from cloud and networking products surpassed cellphones, Liu said.
Last year as a whole, cloud and networking products accounted for 40 percent of Hon Hai's total sales, smart consumer electronics 38 percent, computing products 15 percent and electronic components and other products 7 percent, company data showed.
Capital expenditures this year would grow by 30 percent from last year’s NT$160 billion, as the company aims to expand regional manufacturing, purchase automation equipment and expand production capacity, Hon Hai chief financial officer David Huang (黃德財) said.
Meanwhile, the company's board of directors approved a proposal to issue a cash dividend of NT$7.2 per share, the highest payout since the company's listing in 1991, with a payout ratio of 52.9 percent.
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