Taiwan's Foxconn (also known as Hon Hai Precision Industry Co., 2317.TW, HNHPF, HNHAF) has emerged as a global technology manufacturing giant by assembling millions of iPhones. Now, after diversifying its revenue on the back of the artificial intelligence boom, the company's main business is no longer Apple (AAPL).

In the second quarter, Foxconn's revenue from AI servers and other cloud and network products, including products produced for major customer Nvidia (NVDA), exceeded that of smart consumer products such as iPhones for the first time.

Investors have long viewed Foxconn's overreliance on its smartphone business as a major risk, analysts said. The top iPhone maker is facing waning sales momentum as demand growth for new iPhones has slowed since the iPhone was first launched nearly 20 years ago.

Wary of this risk, Foxconn Chairman Liu Yangwei has been pushing for new businesses such as AI servers, electric vehicles and semiconductors since taking office in 2019.

While expansion in electric vehicles and chips has yet to significantly contribute to revenue, Foxconn's success in making AI servers (it is Nvidia's largest server maker) comes from an early presence -- well before ChatGPT kicked off the AI ​​craze in late 2022.

In the second quarter, consumer electronics accounted for 35% of Foxconn's total revenue, while cloud and networking businesses accounted for 41%. In 2021, consumer electronics will account for 54% of revenue.

Analysts say Foxconn's prudent investments years ago led to its now-valued partnerships with the U.S. AI chip company and other major artificial intelligence companies.

"Foxconn has been deeply involved in this field for many years, meeting higher quality requirements, diversifying assembly and operations in multiple locations, and pursuing vertical integration," said Ming-Chi Kuo, an analyst at TF International Securities.

Foxconn began producing reference designs for Nvidia graphics cards around 2002 and general-purpose servers for cloud service providers' data centers as early as around 2009. Analysts believe that its AI server business with Nvidia is the culmination of this history.

Foxconn said it is now one of the world's largest suppliers of general-purpose servers and AI servers, with market shares approaching 40% for both.

Ming-Chi Kuo pointed out that Foxconn is more willing than other companies to invest money in the early stages of projects, such as its past investment in Apple and its current similar move with Nvidia. "In long-term cooperation, Foxconn is more willing to take the initiative."

Analysts say Foxconn plans to build factories in Houston, Texas (as part of Nvidia's $500 billion U.S. investment plan) and Mexico to produce AI servers for the U.S. customer, a move that underscores its strategic direction.

Foxconn now expects third-quarter AI server revenue to grow more than 170% year-over-year.

Foxconn and Nvidia declined to comment. Apple did not respond to a request for comment.

wider transformation

Foxconn's transformation reflects an overall trend in Taiwan's tech industry: Companies that were once focused on consumer electronics -- such as iPhone-focused Foxconn, laptop-focused Quanta Computer and Wistron -- are now investing heavily in AI servers.

Nvidia partner Wistron's revenue increased 92.7% from January to July, while Quanta's revenue increased 65.6% during the same period.

“The surge in monthly sales to Taiwanese original design manufacturers (ODMs) in the first half of 2025 is evidence of this trend,” said Robert Cheng, head of Asia technology hardware research at Bank of America Global Research. The ODM he refers to is companies like Foxconn that manufacture products for customers.

Chris Wei, an industry consultant at the Taiwan Market Intelligence and Consulting Institute, said that Taiwan’s technology supply chain has been working closely with U.S. technology giants in the field of data center infrastructure for the past decade, which is one of the reasons why they can quickly transform into the AI ​​server field.

He estimates that Taiwan accounts for about 80% of global server shipments and more than 90% of the AI ​​server sector.

Zheng Zongru agreed: "We believe that the transition to AI servers, regardless of form, will be beneficial to Taiwan's technology industry." He specifically mentioned that Taiwanese companies can quickly adjust to meet the changing needs of customers.