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The backstory: Foxconn is a big manufacturing company from Taiwan that's known for making Apple gadgets like iPhones and iPads. It also is Apple’s biggest supplier of the servers it uses in its data centers. Now, as artificial intelligence (AI) continues to advance at full speed, Foxconn has set its sights on AI applications and is ramping up its server business this year. The company already has a 40% slice of the global server market and is aiming to expand even more.
In the first part of the year, a significant chunk (around 22%) of Foxconn's earnings came from its cloud and network products segment, which includes servers. Interestingly, this was second only to its top earner, smart consumer electronics like smartphones, which accounted for 56% of its revenue.
More recently: Rumor also has it that Apple is working on its own AI tools, much like OpenAI's ChatGPT and Google's Bard. It’s reportedly developed a tool called "Ajax" that will be a framework to lead to the creation of a chatbot, unofficially named "Apple GPT," that's currently for internal use only. These tools are designed to generate all sorts of content, from text to audio and images.
Even though Apple has been sort of quiet about AI compared to tech giants like Alphabet and Microsoft, who've taken leaps into the field, in its quarterly earnings call just last week, CEO Tim Cook mentioned that the company’s been exploring AI for quite a while, though he didn’t say much more about it.
The development: According to a recent report from Taiwan's Economic Daily News, Foxconn Industrial Internet (FII), one of Foxconn’s subsidiaries, is set to become Apple's exclusive supplier for AI servers, all manufactured in Vietnam. This move aligns with Apple's strategy of diversifying away from China's manufacturing hub. This reported partnership is another achievement for FII, which has also been providing servers to other industry giants like Amazon Web Services, OpenAI and Nvidia.
“We view AI and machine learning as core fundamental technologies that are integral to virtually every product that we build,” said Apple CEO Tim Cook.
"More and more people are using ChatGPT," said Foxconn Chairman Liu Young-way in May to shareholders. "You can see the market for AI servers will rise much faster than expected. We expect that in the second half of this year there may be a three digit increase."
"The culture there is very similar, our rules and regulations are a bit different, but there is no problem when it comes to talent. So it's relatively easier for us to start new undertakings there. We'll work hard to keep developing there," said Liu, referring to its investment in China.