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Hon Hai Mexico land purchase for AI server expansion: Source

02/28/2024 05:11 PM
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Hon Hai Precision Industry Co.'s headquarter in New Taipei. CNA file photo
Hon Hai Precision Industry Co.'s headquarter in New Taipei. CNA file photo

Taipei, Feb. 28 (CNA) Taiwan-based manufacturing Hon Hai Precision Industry Co. has spent about NT$827 million to acquire land in Mexico as part of the company's AI server production expansion, according to a source familiar with the matter.

In a statement posted on the Taiwan Stock Exchange (TWSE) Tuesday, Hon Hai said that through its subsidiary FII AMC Mexico S. DE. R.L. DE C.V., the company had spent 453 million Mexican pesos (US$26.52 million) to secure a 421,600 square-meter plot of land in El Salto, Jalisco State.

According to Hon Hai, the investment to acquire the land came from a fund injection of US$30 million into FII AMC Mexico by Hon Hai's Singapore-based unit Cloud Network Technology. FII AMC Mexico is owned by Foxconn Industrial Internet Co. (FII), Hon Hai's Shanghai-listed subsidiary.

In the statement, Hon Hai, the world's largest contract electronics maker, only said the investment was made to meet its operational needs.

However, a source familiar with the matter said that FII had set up a plant in Mexico for the development of Surface Mount Technology (SMT), which is used as one of the critical technologies for AI server production.

According to the source, the newly acquired land in Mexico is expected to push for AI server production expansion at a time of a boom of AI applications in the global market.

In addition to Mexico, Hon Hai, also known as Foxconn on the global markets, has established SMT development hubs in the United States and Vietnam, the source said.

These plants, along with Hon Hai's production lines in Taiwan, have allowed the iPhone assembler to build sprawling facilities for making AI servers outside of China, the source said.

Earlier this month, Hon Hai spokesman James Wu (巫俊毅) said that with artificial intelligence development set to grow rapidly in 2024 and 2025, he expected AI servers would become an important sales driver for the company this year.

Given that growth and the more than 40 percent share of the global AI server market already held by Hon Hai and other companies under its corporate umbrella, AI-related products such as servers should spur sales growth in the coming year, Wu said.

At an investor conference in August 2023, Hon Hai Chairman Young Liu (劉揚偉) said his company accounted for more than 70 percent of global sales in graphics processing unit (GPU) substrates and GPU modules used in AI server production.

In Mexico, Hon Hai has intensified efforts to extend its reach for years.

In early January, Ingrasys Technology Inc., a cloud solution subsidiary, raised its investment by US$10 million in a subsidiary in Mexico. Ingrasys acquired a stake in the Mexican unit for US$27 million in September 2021 to expand the server assembly business.

In September 2023, Hon Hai announced it has set up a strategic partnership with the Chihuahua state government of Mexico to advance training and foster innovation technologies.

According to Hon Hai, the company will take advantage of the partnership to work with the government in Chihuahua to enhance energy efficiency, explore renewable energy sources, and support sustainable power solutions.

In September 2022, Hon Hai invested US$361 million in Mexico in the consumer electronics processing business.

(By Chung Jung-feng and Frances Huang)

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