Shortage of AI Chips at Foxconn Significantly Impacting Server Business

Foxconn’s chairman expressed concern about an insufficient availability of chips until there is an improvement in production capacity.

The Chairman of Hon Hai, widely recognized as Foxconn in the West, is uneasy about the shortage of AI-ready chips in the server market.

In a speech at the company’s Lunar New Year dinner, a link to which can be found here, Chairman Young Liu projected the AI chip shortage will carry on until 2024. The resolution of the shortage relies on the commencement of new factories and a stable geopolitical situation.

Liu forecasted a minor advancement in Hon Hai’s annual performance, the growth of which is presently restrained due to the chip paucity. The company had previously put forward neutral and cautious estimations for 2024.

While Hon Hai is best known as Apple’s contract manufacturer for the iPhone, the firm manufactures PCs, components, and servers for a variety of companies.

Overall, it holds approximately 43% of the global server market share, according to Digitimes Research. Last year, Liu said that sales of AI servers are expected to hit $150 billion by 2027, which is larger than the predicted size of the entire server market for 2025.

In earnings calls, executives from Hon Hai said they expect the Cloud and Networking Products division to be one of its main growth drivers for 2024 because of the strong demand for AI servers. 

The company reported on Monday in Taiwan that it saw a significant rise in cloud and networking product revenue, but a decline in computing product revenue due to slower PC demand.

Taiwan Semiconductor (TSMC) is progressing on significantly augmenting its fab capacity, featuring a second fab in Japan potentially starting its operations towards the end of February, as well as a fab devoted to Europe’s automotive sector projected to be constructed in Germany.

In recent news, TSMC surpassed Intel and Samsung and established itself as the leading semiconductor maker in the world in terms of revenue.

Simultaneously, various companies such as OpenAI and Microsoft are crafting their own bespoke chips for AI workloads with the aim to enhance cost efficiency and processing capabilities for generative AI. This move is directed towards overcoming the hindrances of general-purpose GPUs and redefining optimization for specific AI tasks.

Open AI’s Sam Altman has reportedly been in dialogues with investors from the United Arab Emirates and with TSMC regarding the establishment of fabs solely intended to cater to OpenAI’s semiconductor needs, thereby possibly lowering reliance on Nvidia.

Nvidia and industry analysts flagged fab capacity as an ongoing concern for the company in their earnings in November. See here.

TrendForce, Taiwan’s market research firm, predicted that the increased demand for AI workloads in servers would lead to a 17% increase in DRAM per unit and a 13% increase in SSDs by 2024. More details.

Apple is gearing up for a significant rollout of new generative AI features in 2024, leading to an expected increase in the demand for AI-capable servers. See more.

In the meantime, the Biden administration in the US is looking to allocate billions in CHIPS Act subsidies to Intel and TSMC for the rapid construction of new fabs. However, Intel has announced a delay in a $20 billion fab project in Ohio due to slow fund distribution and uncertainties in the semiconductor market. Read more and learn more.

Leave a Reply

Your email address will not be published. Required fields are marked *

Previous Article

Why CD Projekt Red Should Not Waste the Potential of Cyberpunk 2077's Night City

Next Article

Part I of '2054': Exploring the Death of a President

Related Posts