Foxconn reported a 27% rise in operating profit for Q2 2025, driven by demand for its AI server business.

The Taiwan-based company, also known as Hon Hai Precision Industry, is the largest contract electronics maker and the main assembler of Apple’s iPhones.

Net profit came in at NT$44.4 billion (US$1.5 billion), beating analyst estimates of NT$38.8 billion (US$1.3 billion), according to LSEG SmartEstimates.

The company manufactures server racks for AI workloads and is a key partner to Nvidia.

It expects revenue from its AI server business to rise over 170% year-on-year in Q3.

On July 30, Foxconn announced a stake in TECO Electric & Machinery in a partnership to build AI data centers.

Foxconn also posted record July revenue on strong AI demand. It is expanding into EV assembly and semiconductor manufacturing, while monitoring global economic and political conditions closely.

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🔗 Source: CNBC

🧠 Food for thought

1️⃣ AI servers deliver significantly higher margins than traditional consumer electronics

Foxconn’s 27% profit jump highlights how AI infrastructure manufacturing offers better economics compared to traditional electronics assembly.

AI servers now represent 40% of Foxconn’s server sales and generate 10-15% higher margins than consumer electronics1. This margin improvement aligns with the company’s projection of over 170% year-on-year growth in AI server revenue for the current quarter.

The shift is notable given Foxconn’s history as the world’s largest iPhone manufacturer. While consumer electronics manufacturing typically operates on slim margins due to intense competition and commoditization, AI server production benefits from specialized requirements and limited competition.

Foxconn’s partnership with NVIDIA to build a 10,000-GPU AI supercomputer in Taiwan further emphasizes this strategic pivot1. The company aims to capture 40% of the global AI server market by 2025, with projected AI segment revenue reaching $34.7 billion1.

This reflects a broader industry trend where infrastructure supporting AI workloads commands premium pricing compared to consumer-facing hardware.

2️⃣ Manufacturing promises often exceed delivery in practice

Foxconn’s Wisconsin experience illustrates a recurring issue where ambitious manufacturing commitments are often scaled back due to economic realities.

The company’s $10 billion Wisconsin project was initially expected to create 13,000 manufacturing jobs but shifted focus to research and development instead2. By 2018, Foxconn had hired only 178 employees despite receiving roughly $4 billion in state incentives2.

The company cited challenges in competing in the U.S. LCD panel market as the reason for abandoning manufacturing plans2. This outcome highlights broader difficulties in establishing competitive manufacturing operations outside of established low-cost regions.

Similar patterns have been observed in other regions. Sources indicate Foxconn has faced challenges in expanding operations in Brazil and has made substantial commitments influenced by tax incentives3. The Wisconsin case shows how political announcements and groundbreaking ceremonies do not always translate into successful execution of complex manufacturing projects.

Recent Foxconn developments

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