Industrial Fulian, which has once again reached the AI boom, has returned to a market cap of 500 billion yuan.
On June 13th, the intraday trading of Foxconn Industrial Internet saw a surge of up to 9%. It closed at 25.9 yuan/share, up 6.28%, with a market value of 514.5 billion yuan. On June 12th in the US Eastern time zone, following the official release of the brand new artificial intelligence feature "Apple Intelligence" on Wednesday, the tech stocks in the US saw a general rise with Apple rising 2.86% and Nvidia rising 3.55%, both hitting new highs. Stimulated by the historic record-high stock price of Apple in the US stock market, the A-share Apple industry chain performed strongly throughout the day.
It is worth mentioning that on June 6th, the stock price of Foxconn Industrial Internet hit the daily limit up and its market value briefly reached 517.86 billion yuan before returning to 510 billion yuan. Driven by the AI concept, the stock price of Foxconn Industrial Internet rose by over 70% from the beginning of the year to the present.
From the performance perspective, Foxconn Industrial Internet's performance growth also benefits from the involvement of AI concept.
As early as 2017, Foxconn Industrial Internet launched the first generation of high-performance computing products (HPC)-AI servers, taking customers in the field of cloud service providers' AI accelerators and AI memory. At present, Foxconn Industrial Internet's business involves the upstream part of the value chain, such as GPU modules, substrates, and back-end AI server design and system integration, providing complete supply chain services.
At the end of May 2023, in a public speech, Huang Renxun, the founder and CEO of Nvidia, specifically mentioned its server supply chain partnerships, which included Foxconn Industrial Internet's subsidiary, Hongbai Technology.
Benefiting from the booming development of upstream computing and the growing downstream demand for AI, Foxconn Industrial Internet's cloud computing business income in 2023 reached 194.308 billion yuan. Among them, the proportion of cloud service provider products is rapidly increasing, reaching nearly half of the total, and the AI-related business volume is nearly 60 billion yuan, accounting for about 30% of the total cloud computing revenue.
"AI servers have become the new growth engine of the company." Foxconn Industrial Internet stated in its 2023 financial report and emphasized the contribution of AI servers in its Q1 2014 report.
In the first quarter of 2024, Foxconn Industrial Internet achieved revenue of 118.688 billion yuan, a year-on-year increase of 12.09%; the net income attributable to owners of the parent company was 4.185 billion yuan, a year-on-year increase of 33.77%. Among them, the cloud computing business has accounted for nearly half of the overall revenue, and the AI server has accounted for nearly 40% of the entire sector's revenue, with a year-on-year increase of nearly 100%, and a sequential growth rate of nearly double digits. In addition, the generative AI server increased nearly three times year-on-year, and the sequential growth rate increased by double digits as well.
On May 15th, Foxconn Industrial Internet provided an outlook for its AI server business at its earnings briefing. Chairman Zheng Hongmeng stated that in 2024, AI is expected to contribute 40% of the company's total cloud computing revenue, and AI servers are expected to account for 40% of the global market share. However, the gross profit margin of the burgeoning AI server business is not high, which means that only continuously increasing sales can provide more profit space.
In 2018, Foxconn Technology Group spun off Foxconn Industrial Internet and went public. It raised 27.1 billion yuan and was backed by Foxconn and the aura of a "super unicorn." Although Foxconn Industrial Internet consolidated multiple concepts such as 5G, cloud computing, industrial internet, and intelligent manufacturing, its core business for the six years after its IPO has remained OEM, with its core products including communication network equipment and cloud computing devices like routers and servers, serving major clients like Alibaba, Amazon, and Apple.
Currently, Foxconn Industrial Internet primarily operates in three sectors of communication and mobile network equipment, cloud computing, and industrial internet. From 2020 to 2023, revenue in its three core sectors has steadily increased, although revenue in all sectors declined in 2023.
Last year, the global economic environment remained sluggish and the smart phone and wearable device markets declined. The communication and mobile network equipment segment, which accounts for nearly 60% of Foxconn Industrial Internet's revenue, decreased by 5.81% year-on-year. Although the gross profit margin of this segment increased by 0.55 percentage points year-on-year to 9.8%, it has been above 10% before 2021.
It is worth mentioning that the gross margin of cloud computing business, including AI servers, is lower than that of communication and mobile network equipment businesses. In 2023, the AI server business drove the gross margin of the cloud computing sector to increase by 1.12 percentage points from 2022 to 5.08%, which is the first time that the gross margin of this sector has exceeded 5% since foxconn industrial internet went public.
In 2023, foxconn industrial internet achieved a revenue of 476.34 billion yuan, a year-on-year decrease of 6.94%; realized a net income of 21.04 billion yuan, a year-on-year increase of 4.82%. Under the situation of declining revenue, foxconn industrial internet had to rely on "open source and thrifty" to achieve a new high in net income. In 2023, the company's R&D expenditure decreased by 777 million yuan from 2022; the total number of employees directly decreased by 7,552 from 2022, reaching a new low since listing; the government subsidies included in the current period's profit and loss amounted to as much as 1.2498 billion yuan.
In fact, foxconn industrial internet's overall gross margin is only 8.06%, and its nature of making hard-earned money is still hard to change.