Hon Hai Precision Industry Co. experienced its fastest sales growth in the first quarter since 2022, driven by strong demand in data centers, marking a positive development for the artificial intelligence industry despite concerns related to tariffs. The Taiwanese manufacturer, known for supplying Nvidia Corp.’s AI servers and Apple Inc.’s iPhones, is benefiting from an increasing need for servers that support AI computing for companies like Alphabet Inc. and Amazon.com Inc.
In the first three months of 2025, Hon Hai’s revenue soared by 24.2% to NT$1.64 trillion ($49.8 billion), aligning with analysts’ forecasts. The contract manufacturer announced on Saturday that it anticipates continued growth in its cloud and networking products segment in the second quarter.
However, Hon Hai expressed caution regarding its overall sales expectations, stating it will need to closely monitor potential impacts from shifting global political and economic landscapes based on current visibility.
Concerns have arisen from Chinese startup DeepSeek’s affordable AI model, raising questions about intensified price competition and the economic feasibility of significant investments in data centers. Compounding this uncertainty is apprehension over a global economic slowdown, exacerbated by recently imposed steep tariffs by US President Donald Trump.
Even within the AI sector, signs of weakness are emerging. Microsoft Corp. has scaled back its global projects while still committing to invest about $80 billion in building data centers through June. Recent reports indicate that the software giant has either halted negotiations or postponed the development of sites in several locations including Indonesia, the UK, Australia, Illinois, North Dakota, and Wisconsin.
Hon Hai, which supplies electronics globally from large production facilities in China and factories in Vietnam, is expected to feel the direct impact of tariffs imposed by the Trump administration. This includes a significant 54% tariff on Chinese goods and a 46% tariff on imports from Vietnam.
CreditSights analysts Jordan Chalfin, Andy Li, and Michael Pugh noted that these tariffs could particularly affect Apple’s smartphone business due to its heavy reliance on China, with Apple’s attempts to diversify manufacturing to Vietnam and India offering little relief. They warned that “hardware OEMs will be directly affected, especially those selling smartphones, PCs, and servers,” estimating that the reciprocal tariffs could result in nearly a $100 billion loss for the global tech industry given the value of US tech imports in 2024.
