Hon Hai Precision Industry Co.’s first-quarter sales rose at their fastest clip since 2022 on resilient data center demand, a bright sign for the artificial intelligence sector amid tariff-induced fears.
The Taiwanese supplier of Nvidia Corp.’s AI servers and Apple Inc.’s iPhones is riding a wave of demand for servers to power AI computing by the likes of Alphabet Inc. and Amazon.com Inc.
Hon Hai’s revenue surged 24.2% for the first three months of 2025 to NT$1.64 trillion (US$49.8 billion or $66.83 billion), in line with analyst estimates. The contract manufacturer said Saturday it expects its cloud and networking products segment to maintain growth momentum in the second quarter.
But Hon Hai cautioned that while it expects overall sales to grow, “based on current visibility,” it would need to closely monitor the impact of evolving global political and economic conditions.
Chinese startup DeepSeek’s cheaper AI model has spurred doubts about growing price competition and the economic viability of plans for billions of dollars in data centre outlays. That’s coupled with fears of a global economic slowdown spurred by an array of steep tariffs levied by US President Donald Trump this week.
See also: OpenAI finalises US$40 billion funding at US$300 billion value
Signs of weakness are appearing even in the AI sector. Microsoft Corp. has pulled back on projects around the world, although it says it remains committed to spending about US$80 billion building data centers through June. The software company has recently halted talks for, or delayed development of, sites in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin, according to people familiar with the situation.
Hon Hai, which delivers electronics to the rest of the world from giant production bases in China and factories in Vietnam, will further shoulder a direct hit from the Trump administration’s tariffs. That includes a 54% levy on Chinese goods as well as a 46% tariff on Vietnamese imports by the US.
See also: Alibaba teams up with BMW to develop AI for cars in China
The tariffs would disproportionately hurt Apple’s smartphone business, given its reliance on China, wrote CreditSights analysts Jordan Chalfin, Andy Li and Michael Pugh in a note to investors. Apple’s diversification efforts to Vietnam and India provides little relief, they said.
“Hardware OEMs will be directly impacted, particularly companies that sell smartphones, PCs, and servers,” the analysts said. They estimate that the reciprocal tariffs will deal a nearly US$100 billion blow for the global tech sector, based on the value of US tech imports in 2024.
What Bloomberg Intelligence says
The US’s reciprocal tariffs on regions such as Taiwan, Vietnam and India — key beneficiaries of the “China Plus One” strategy — could place mounting pressure on electronics manufacturing services (EMS) firms such as Hon Hai and Quanta, potentially impeding both margins and demand. EMS players with substantial US capacity, such as Flex and Jabil, could benefit from windfall order shifts. Asian manufacturers might lean on Mexico as a near-term cushion while increasingly prioritizing a US footprint.- Steven Tseng and Sean Chen, analysts
Hon Hai Chairman Young Liu said last month the company was exploring ways to expand production in several US states. Earlier this year, Apple said it was partnering with Foxconn to begin making servers in Houston. Other Taiwanese electronics manufacturers are also following suit.
