1. 2Q 2023 margins, on gross and net basis, up vs year ago
2. 3Q 2023 on-quarter operating performance seen higher
3. Full-year outlook to slightly decline vs original flat expectation
4. Active discussions with existing and potential customers on 20 EV projects
5. Strong growth anticipated on back of AI server outlook

14 August 2023, Taipei, Taiwan – Hon Hai Technology Group (“Foxconn”) (TWSE:2317) today announced its second quarter 2023 financial results.

Revenue in the April-June quarter reached NT$1.3045 trillion, and gross profit margin for the same period gained on both a quarterly and annual basis. Although second quarter is traditionally off-peak season, overall revenue and gross profit margin were still better than expected. Operating performance in the third quarter should warm up and show a trend of on-quarter growth. However, considering many external variables, in response to uncertainties such as global monetary tightening, geopolitical tensions, and inflation, the full-year outlook is now expected to slightly decline, from previous flattish expectations.

In the second quarter of 2023, revenue totaled NT$1.3045 trillion, down 14% on year. Gross profit, at NT$83.6 billion, fell 14% at the same time; operating income was NT$30.9 billion, down 30%; while net profit fell 1% from a year ago to NT$33.0 billion. Both gross profit margin and net profit margin rose compared to a year ago, to a respective 6.41%, and 2.53% from a respective 6.40% and 2.21%. However, operating profit margin declined to 2.37% from 2.94% for the same period. EPS was NT$2.38, down by NT$0.02 compared with a year earlier.

First of all, with regard to the current hot topic of AI servers in the market, Chairman Liu, introducing the entire supply chain, said that from the perspective of generative AI products, they can be roughly divided into GPU modules, GPU substrates, AI servers, racks, advanced cooling solutions, all the way to the AI data center. Hon Hai is the only manufacturer that can provide a complete solution. "Hon Hai has achieved a high market share in the front end of the AI server industry value chain with GPU modules and substrates!"

In terms of technology, Chairman Liu said that Hon Hai’s ability to provide one-stop integrated services in the AI server industry lies in its continuous investment in research and development of key technologies, especially in energy consumption and heat dissipation technologies. The Group will focus on providing a modular design and a cooling solution with low PUE (Power Usage Effectiveness), to greatly reduce the heat dissipating energy consumption of the data center. Hon Hai's advanced cooling solutions, including liquid cooling and advanced immersion racks, have a PUE performance that is better than the industry average.

Regarding ongoing interest in the expansion of Hon Hai’s automotive customers, Chairman Liu said that the Group is currently discussing cooperation with more than 10 customers on 20 electric vehicle projects. Among them, production has started for 2, while contracts with 5 are likely to be signed. Meanwhile, mass production in Taiwan for the family SUV MODEL C made by Foxtron Vehicle Technologies is on schedule for the fourth quarter of this year. Further developments in the EV area are expected to be provided on Hon Hai Tech Day on October 18.

During the investor call, Chairman Liu announced that Hon Hai has established a strategic partnership with Microsoft regarding low Earth orbit global satellite system. The Group will aim to create a space Internet solution, under the three major applications of Internet of Vehicles, smart city and B5G communication infrastructure. Combining that with Hon Hai’s CDMS, Microsoft’s Azure Space technology and ground station services, based on B2G, the efforts can promote satellite system development with BOL countries.

On build-operate-localize (BOL) developments, Chairman Liu said that Hon Hai has been working in Saudi Arabia for many years. Currently, the areas of 3+3 and ICT are being deployed to complement the goals of Vision 2030, the Kingdom’s transformative national development plan. In addition to the CEER joint venture, the Group is also cooperating with multiple ministries, PIF and several flagship projects under NEOM. Hon Hai will gradually announce the fruits of our cooperation before the end of the year.

Turning to India, Chairman Liu pointed out that since Hon Hai entered India in 2005, its revenue, number of employees, and investment scale have grown exponentially. At present, it is mainly engaged in the ICT final assembly business. Going forward, Hon Hai will actively deploy work in the area of key components to raise its competitiveness in India.

In addition, to existing operations in the Andhra Pradesh and Tamil Nadu states, Hon Hai will also deploy in Karnataka, Telangana and other states. Through close cooperation with central and local governments, Hon Hai will plan to establish industrial parks and optimize the business environment in terms of infrastructure, policies and laws.

Hon Hai will continue to implement the BOL strategy in Southeast Asia, including in Vietnam, Thailand and Indonesia, to assist local partners to improve the supply chain and enhance indigenous competitiveness. We will also actively share global resources with these partners to expand the local market and share in the achievements.