Foxconn announced on Wednesday that it will invest in TECO Electric & Machinery, a move aimed at accelerating its emergence as a key player in the construction of artificial intelligence data centers. This hotel is known as "Hon HaiThe Taiwanese company, officially known as "Precision", is trying to copy its success in the field of consumer electronics to the world of AI.
According to data from Counterpoint Research, this move may open up a market opportunity for Foxconn with a potential value of US$1 trillion in the enterprise data center field in the next few years. It will also allow the foundry giant to compete head-on with companies such as ABB, Siemens and Mitsubishi Electric.
Through the equity swap, Foxconn will obtain 10% of TECO Electric's shares. TECO Electric initially started out as a manufacturer of automobile engines, and has now expanded its business into areas such as electric vehicles, energy storage and data center construction. Foxconn, an Apple iPhone assembler and a core partner of Nvidia, currently produces server racks designed specifically for AI workloads.
The two companies are integrating their respective expertise to provide a one-stop solution for AI data center builders. Qiu Chunzhi, chairman of TECO Electric, said: "This strategic cooperation will extend the cooperation between the two parties in the fields of low-carbon smart factories and energy services to overall data center solutions."
As Foxconn seeks to diversify revenue beyond consumer electronics manufacturing, AI server assembly has become a key strategic focus. Foxconn previously predicted that its AI server revenue in the second quarter is expected to double year-on-year. The company has also shown a willingness to expand into new areas such as electric vehicle assembly and even semiconductor manufacturing.
Neil Shah, partner at Counterpoint Research, said on Wednesday: "With the rise of the AI infrastructure craze, Hon Hai's strategic alliance with TECO aims to extend the value chain of server components and racks from joint design and manufacturing to engineering and infrastructure construction services to achieve deep integration. Hon Hai's goal is to become a one-stop supplier of all data center needs."
Tech giants from Microsoft to Google have unveiled plans to spend tens of billions of dollars building data centers containing chips and servers this year alone - exactly the market Foxconn is targeting. Foxconn and TECO Electric said their business target areas include Taiwan Province, other regions in Asia, the Middle East and the United States. The two companies specifically mentioned their business layout in the United States, saying they plan to "expand local manufacturing in the United States and reshape the global supply chain."
Counterpoint Research's Shah noted: "The complete data center solution will provide a strong impetus to Foxconn's business, allowing it to capture a larger share of the overall data center capital expenditure including servers and physical infrastructure."