• Visibility better vs start of year due to strong AI server demand
• 1Q24 net profit up 72% on year; AI server growth up nearly 200% on-year
• 2Q24 expected to show significant growth QoQ, YoY
• Full year 2024 outlook for significant growth unchanged
• Japan has become important market for Group’s electric vehicle CDMS

14 May 2024, Taipei, Taiwan – Hon Hai Technology Group (“Foxconn”) (TWSE:2317) today announced its first quarter 2024 financial results.

In the January-March quarter revenue hit NT$1.324 trillion, with key profit margins all improving. Earnings per share for the first three months of 2024 reached NT$1.59. Looking ahead at the second quarter, despite its traditional off-peak season and with the exception of smart consumer electronics, the other three major product segments should experience strong growth, reflecting the Group’s leading edge in the ICT industry and capabilities to attract new business. There will be significant growth quarter-on-quarter and year-on-year in the second quarter; the magnitude will be better than the average level of the past three years. Due to strong demand for AI servers, the company sees visibility for the full year is better than at the beginning of the year.

In the first quarter of 2024, revenue reached NT$1.324 trillion, down 9% on year. For the same period, gross profit at NT$83.7 billion, was off 5% on year; operating profit at NT$36.8 billion, declined 9% on year; however, net profit (attributable to the owners of the parent company) at NT$22 billion, rose 72% on year. Gross profit margin, operating profit margin and net profit margin all improved, standing at 6.32%, 2.78%, and 1.66% respectively, compared with 6.04%, 2.77%, and 0.88% in the same period last year; EPS for the first three months of this year reached NT$1.59, compared with NT$0.93 a year ago, an increase of NT$0.66.

During the last investor conference in March, Hon Hai raised its full-year 2024 outlook from neutral to significant growth. The outlook remains unchanged, but full-year visibility is now better than in March, primarily due to strong demand for AI servers.

The existing ICT market size is nearly US$1 trillion, while some research institutions predict the AI industry will exceed US$1 trillion within seven to eight years, with hardware accounting for more than half of that scale. This is the sweet spot for Taiwanese manufacturers, particularly for Hon Hai. In coming years the emerging AI industry can contribute greatly to the Group and drive a significant increase in revenue and the proportion of Hon Hai's cloud and networking products.

Responding to continued increase in demand for AI servers, Hon Hai’s revenue from AI servers in the first quarter grew nearly 200% compared with the same period last year and is expected to improve with each quarter; at the same time, general server demand also continues to rebound, leading to strong growth in overall servers. Demand for networking products has also begun to rebound.

Regarding Hon Hai’s vertical integration advantages in the AI server industry, Hon Hai is pretty much the only one who can provide every key component from modules, baseboards, servers, high-performance switches, liquid cooling systems to complete racks and data centers. The key to our technology excellence is our in-house R&D for those components. Also, the Group’s deployment of comprehensive server production bases around the world not only meets customers’ stringent requirement for localization, but also heightens Hon Hai’s manufacturing capabilities due to higher requirements for water, electricity and gas during production and testing of AI servers.

Aside from continuously optimizing the system performance of products to satisfy the highest quality demands of customers, Hon Hai has also set up an AI performance laboratory to enhance the integration of software and hardware through systematic analysis. Moreover, the Group’s Taoyuan Nanqing Factory obtained certification as the world's first AI server Lighthouse factory, demonstrating our leadership in AI hardware production and manufacturing.

Turning to electric vehicles, the MODEL C – the passenger SUV sold under the Luxgen-branded N7 – took the top spot in April for unit sales of electric vehicles in Taiwan. For the first four months of this year, deliveries to the automotive customer exceeded 1,500 units and will be accelerated going forward. Before the third quarter of this year, all orders currently in hand can be completed. Annual shipments will exceed 10,000 units, and the revenue target will exceed NT$10 billion.

Regarding MODEL B, the anticipated and well-liked sporty crossover EV, it has entered the mass production development stage and Hon Hai anticipates mass production to begin in the first half of next year.

Demand outstrips supply for the MODEL T, the electric bus that is part of public transport in cities across Taiwan. In order to increase its production capacity, the Kaohsiung Qiaotou plant broke ground last month and will begin production and shipment in the third quarter of 2025. Initial output will be about 500 vehicles per year, expanding to a target of 1,000 vehicles in 2028. Moreover, the new Qiaotou plant will also plan for an experimental testing environment for commercial and passenger vehicles to further promote Taiwan's electric vehicle industry.

In addition to the Taiwan market, Hon Hai anticipates sales abroad for those three electric vehicles to expand into the markets of Southeast Asia, the United States and Europe. Moreover, since the fourth quarter of last year, rapid progress has been made in Japan. Japan has become one of Hon Hai's most important markets; the Group currently has two CDMS customers and three ongoing CDMS projects. MOUs between Hon Hai and the customers are in place, and formal contracts are expected to be signed in the third and fourth quarters of this year. Further details will be disclosed at an appropriate time.

In the field of autonomous driving, Hon Hai continues to cooperate with NVIDIA to optimize the development of autonomous driving software. Through the powerful computing power of NVIDIA AI toolchain, we can quickly deploy the latest algorithms, greatly accelerating the research and development process. We also propose a more integrated architecture and continue to optimize the design of the four core components, which can effectively shorten the time-to-market of the whole vehicle for customers.

Discussing SHARP’s operational direction, Hon Hai points out: “The worst is behind SHARP. Its future only gets better from here!” SHARP’s unique, innovative technology and century-old brand are very rare in the global market. SHARP has set aside asset impairment from the panel display business to facilitate its move to become asset light. Going forward, Hon Hai will cooperate with SHARP to integrate its smart products for people, vehicles, home and office into our 3+3 strategy that we actively promote, and together we will seize new opportunities in the AI technology revolution.