Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract server maker, yesterday said it is targeting to grow its annual revenue by 36 percent to NT$11 trillion (US$350.5 billion) this year, driven by robust demand for artificial intelligence (AI) server racks given heavy expenditures from global cloud service providers.
Last year, demand for AI servers grew significantly, driving a major shift in Hon Hai’s revenue structure, chairman Young Liu (劉揚偉) told the company’s annual general meeting in New Taipei City’s Tucheng District (土城).
Cloud and networking products accounted for about 40 percent of the company’s total revenue of NT$8.1 trillion last year, replacing smartphones as Hon Hai’s largest business segment. The cloud and networking products are to contribute an even bigger share this year, Liu said.
Photo: CNA
With rapid growth in AI-related business, Hon Hai’s revenue and profit are expected to continue growing strongly in the coming years, he said.
The four major cloud service providers (CSPs) in the US are expected to spend more than US$700 billion on capital expenditure this year and to spend even more next year, he said.
The company is optimistic about its performance in the second half of the year after delivering a strong first-quarter result, he said. Revenue rose 29 percent year-on-year to NT$2.12 trillion in the first quarter, a record high for the period.
Each generation of new AI server platforms would create new opportunities for Hon Hai to win new customers and orders, he said. Hon Hai now commands more than 40 percent of the global AI server market, Liu added.
Hon Hai’s server rack shipments are expected to more than double this year, with shipments increasing quarter-on-quarter and growth momentum extending through to the end of the year, he said.
Hon Hai is “highly positive” about the shipment schedule and momentum of Nvidia Corp’s next-generation Vera Rubin AI server platform, with second-half shipments expected to proceed smoothly, he said.
In response to a question about whether Hon Hai would be one of the first suppliers to mass-produce Nvidia’s Vera Rubin platform, Liu said if “you look at how many Hon Hai components are inside the machine, you can probably guess.”
Hon Hai supplies key components used in AI servers — including connectors, cables, cooling modules, optical switches and related parts — through its vertically integrated operations, Liu said.
Hon Hai is also cooperating with other graphics processing unit, central processing unit and application-specific integrated circuit chipmakers, Liu said.
Edge computing devices would become Hon Hai’s second major growth drivers such as electric vehicles and robotics, Liu said.
Hon Hai expected limited impact from memory chip shortages through the end of this year as most of its clients focus on high-end products, Liu said.
Hon Hai has also expanded into the co-packaged optics (CPO) sector and is set to ship about 10,000 CPO switches this year, Liu said. Shipments are expected to grow several-fold next year, he added.
To support the rapid expansion amid the AI boom, Hon Hai plans to increase capital expenditure by more than 30 percent this year from NT$170 billion last year, Liu said.
The investment is aimed at expanding production capacity and automation, he said.
Shareholders yesterday approved proposals to distribute cash dividends of NT$7.2 per share, the highest ever, representing a payout ratio of 52.9 percent based on the company’s earnings per share of NT$13.61 last year.
The company has made earnings equal to its share capital for five consecutive years, Liu said. The company’s long-term goal is to make annual earnings equal to twice the company’s share capital, Liu said.
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