Foxconn to spend up to $3 billion a year on AI, chair sees China EV shakeout

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By Daniel Leussink, Maki Shiraki and David Dolan

TOKYO (Reuters) -Foxconn will invest $2 billion to $3 billion a year in AI, the head of the world’s largest contract electronics maker told Reuters.

Foxconn Chairman Young Liu also said he expects a shakeout in China’s crowded electric-vehicle market “soon” and that the company is talking with the Japanese government about potential investments in artificial intelligence and EVs.

“For now, AI will be the majority of the investment,” Liu told Reuters on a visit to Tokyo earlier this month. Liu’s comments were embargoed until Friday, to coincide with the Apple supplier’s annual Hon Hai Tech Day.

The investment in AI infrastructure and technology development over the next three to five years means it will account for more than half of Foxconn’s roughly $5 billion in annual capital expenditure, said Liu.

The Taiwanese company’s cloud and networking business, which includes AI servers, has surpassed consumer electronics for two consecutive quarters, highlighting how quickly its revenue mix is shifting.

Liu, who has led Foxconn since 2019, said China’s EV sector faces “very fierce competition” and forecast consolidation as unprofitable startups disappear and government support wanes.

“They’re not making money,” Liu said, adding that government support was too limited to support every EV maker in the world’s largest auto market. He said China’s automotive landscape will be “much more stable” once there is a period of consolidation.

The squeeze on EV makers in China is already evident. Top EV maker BYD reported its biggest quarterly profit drop in more than four years last month.

BYD faces growing competition from domestic rivals and slashed its 2025 sales target to 4.6 million vehicles.

TALKING WITH JAPAN ON AI, EV INVESTMENT

Foxconn delayed its ambitious target to capture 5% of the global EV market by 2025 in November last year, as the sector faces a slowdown in demand worldwide.

But rather than losing faith in EVs, it is holding off on ramping up investment until market conditions improve, with potential plans to expand in EVs or other areas such as quantum computing and robotics.

Foxconn is talking to Japan’s government about possible investments in EV or AI, Liu said, without giving details. He added that local manufacturing of AI systems is critical for data sovereignty.

Liu said the EV sector could become like the early personal computer industry, where intense competition made in-house production unsustainable and drove a shift to outsourcing.

Foxconn pioneered that model with Compaq Computer in the 1990s the world’s largest PC supplier. Liu said a similar dynamic is emerging for EVs, with carmakers likely to outsource faster as competition intensifies.

“Once they start outsourcing with one successful example, the others will follow,” he said. “That’s exactly what we saw in the PC market.”

($1 = 31.1830 Taiwan dollars)

(Reporting by David Dolan, Maki Shiraki and Daniel Leussink; Editing by Alexander Smith)