Foxconn CEO Sees Long Runway for AI Investment, Driven by AGI Advancements and Booming Demand
Foxconn, a leading global electronics manufacturer and key Apple supplier, anticipates sustained growth in the artificial intelligence (AI) sector, fueled by the ongoing evolution of large language models (LLMs) and the burgeoning demand for advanced AI infrastructure. Chairman Young Liu, in a recent CNBC interview, highlighted the significant potential of **Artificial General Intelligence (AGI)** and its impact on the industry, predicting a long-term boom for AI servers and, subsequently, **on-device AI** in mobile devices. This positive outlook is corroborated by Foxconn’s record-breaking third-quarter revenue, driven primarily by strong demand for AI server components, particularly Nvidia’s upcoming Blackwell GPU.
Key Takeaways:
- Foxconn’s CEO, Young Liu, believes the AI boom is far from over, with **AGI** development driving continued growth.
- Record-breaking third-quarter revenue for Foxconn, exceeding expectations, is attributed to surging demand for AI servers.
- Massive demand for Nvidia’s next-generation Blackwell GPU (GB200), with Foxconn ramping up production to meet it.
- On-device AI, enabling AI functionalities directly on mobile devices, is poised to become the next major growth area.
- The smartphone industry anticipates a “supercycle” of growth driven by AI-powered features in new handsets.
The AGI-Fueled AI Boom: A Long-Term Perspective
While significant advancements have been made in AI, particularly in the realm of LLMs, Foxconn’s CEO believes that the industry is still in its early stages. Liu emphasized the concept of **AGI**, describing the current state of AI development as only at “level two” on a four-level scale. He stated, **”We … heard about AGI, and we’ll talk about different levels of intelligence. If you divide [intelligence] into four different levels, we’re at level two. There’s still level three and level four to go.”** This implies a significant potential for future growth as AI systems continue to evolve towards higher levels of intelligence.
This viewpoint aligns with expert opinions, but differs with opinions by other leading figures in the AI industry. OpenAI CEO Sam Altman has previously suggested that AGI is approaching, though its impact on employment might be less disruptive than generally anticipated. The recent $6.6 billion funding round for OpenAI at a $157 billion valuation underscores the substantial investment and confidence in the continuing development of increasingly sophisticated AI models, including the anticipated launch of GPT-5.
The Server Industry’s Bright Future
Liu’s optimistic outlook extends to the AI server industry. He believes that the continued progress toward AGI will only fuel further growth in this sector. **”I think for the AI server industry, I think we still have some time to grow,”** he added, **”With the AGI capability growing, the age [of] AI devices will be another industry we should watch carefully.”** This highlights the interconnectedness between advancements in AI algorithms and the demand for powerful hardware to support them.
Foxconn’s Record Revenue and the Demand for Nvidia’s Blackwell Chip
Foxconn’s recently announced record-breaking third-quarter revenue of 1.85 trillion Taiwanese dollars ($57.5 billion), a 20.2% year-over-year increase, serves as compelling evidence of the current strength of the AI infrastructure market. This exceeded their own projections, underscoring the unexpectedly strong demand. The company attributes this success to the booming demand for AI servers, a market where Foxconn is a major player, supplying leading tech giants like Amazon, Google, Microsoft, and Nvidia.
A pivotal element in Foxconn’s success is its role in manufacturing Nvidia’s upcoming Blackwell GPU (GB200). Liu revealed that Foxconn is on track to ship this much-anticipated chip in the fourth quarter of 2024. The demand for Blackwell, according to Liu, is **”much better than we thought,”** prompting Foxconn to build new factories in Mexico to meet the anticipated surge in orders. This echoes Nvidia CEO Jensen Huang’s assessment of **”insane”** demand for the chip, further validating Foxconn’s positive outlook.
Blackwell’s Market Impact
The high demand for the Blackwell GPU, priced between $30,000 and $40,000 per unit, reflects the intensive computational requirements of modern AI applications. Companies like OpenAI, Microsoft, and Meta are among the key customers investing heavily in AI data centers powered by such advanced chips to support their increasingly complex AI services, including chatbot platforms like ChatGPT and Copilot.
On-Device AI: The Next Frontier for Growth
Foxconn isn’t just focused on cloud-based AI infrastructure. The company also plays a crucial role in the development of on-device AI, exemplified by its contributions to Apple’s newest iPhones, which incorporate cutting-edge generative AI capabilities. Liu explicitly identified on-device AI as the next significant growth opportunity. He highlighted the transition from cloud-based AI to AI processing directly on devices: **”I think the genAI-related device will be the next way to grow,”** he stated, **”Currently, we’re seeing this on the cloud side. You see that genAI cloud equipment was very much booming. But in the next phase, what we’re seeing will be the Gen AI devices. We think that will be the next big way to boom … We have very high hopes on those devices.”**
This shift towards on-device AI is driving a wave of innovation in the smartphone sector, with manufacturers like Apple, Samsung, Google, and Honor incorporating advanced AI features into their newest releases. This push is fueling hopes for a “supercycle” of sustained growth in the smartphone market, signaling a significant potential market for AI-powered devices.
The Smartphone Supercycle
The smartphone market, after several years of decline, is experiencing a resurgence, with global shipments showing consistent growth. IDC’s preliminary data indicates a 6.5% year-over-year increase in shipments during the second quarter of 2024, reaching 285.4 million units. This positive trend is further bolstered by the incorporation of AI capabilities in new devices, which is expected to drive future demand and sustain this positive market outlook. While Apple’s Apple Intelligence system is not yet fully released publicly, it, along with similar developments from competitors, are anticipated to significantly affect smartphone sales.
In conclusion, Foxconn’s optimistic outlook on the AI market, coupled with its record-breaking performance and involvement in key technological advancements, paints a picture of continued growth fueled by the burgeoning potential of AGI and the increasing demand for both cloud-based and on-device AI solutions. The company’s strategic positioning within the AI ecosystem, from server infrastructure to mobile devices, positions it for significant long-term success in this rapidly evolving industry.
