Hon Hai invested-LCD panel firm in Osaka to become AI data center

Taipei, May 14 (CNA) Sakai Display Product Corp. (SDP), a liquid crystal display (LCD) panel maker located in Osaka and invested in by Taiwan's manufacturing giant Hon Hai Precision Industry Co., will be transformed into an artificial intelligence data center, Hon Hai Chairman Young Liu (劉揚偉) said Tuesday.

Speaking at an investor conference held by Sharp Corp., a subsidiary of Hon Hai, which controls SDP, Liu said in a recorded message that transforming SDP into an AI data center is expected to be a good use of Sharp's assets.

The decision was made after Japanese news media recently reported SDP would stop production of flat panels in September, indicating Sharp would stop rolling out TV screens in Japan.

SPD became operational in 2009 with a 430 billion Japanese yen (US$2.94 billion) investment by Sharp, according to reports.

However, with intensifying price competition for LCD panels, SDP incurred 36 billion yen in net losses in the fiscal year ending in December 2022, the reports said.

Due to its struggling flat panel business, Sharp reported a net loss of 149.98 billion yen in March 2024, marking a second straight fiscal year of losses, the reports added.

Liu said Sharp is a long-term strategic partner and an important asset of iPhone assembler Hon Hai, so his company has been determined to boost the Japanese subsidiary.

Liu added that he has flown to Japan every month since July 2023 to attend discussions with Sharp's management about a possible change of the Japanese subsidiary's business strategies with SDP operations in focus.

He said Hon Hai has intensified its efforts in pushing for the "3 Plus 3" initiative and that his company has aimed to help Sharp in smart product development and lead it to seize on AI-boom related opportunities.

The initiative refers to three emerging industries -- electric vehicles, robots and digital health care -- the company is developing via AI, semiconductor and communication technologies with EVs as the core business, according to Hon Hai.

Meanwhile, in an investor conference held by Hon Hai in Taipei on Tuesday, Hon Hai spokesman James Wu (巫俊毅) said sales generated by the company's AI server business soared more than 200 percent from a year earlier in the first quarter of this year.

Wu said the momentum of the AI server business would continue to grow quarter by quarter this year, adding Hon Hai has left its guidance that AI server sales will grow more than 40 percent from a year earlier in 2024 unchanged.

AI servers are expected to make up more than 40 percent of Hon Hai's total server sales this year, Wu added.

● Hon Hai Q1 net profit up 72% year-on-year but down 59% sequentially

He said Hon Hai has worked with U.S.-based AI chip designer Nvidia Corp. in AI software solutions and that his company will continue to upgrade its AI server production sites worldwide.

Before the investor conference, Hon Hai released its first quarter results, in which the company announced it posted NT$22.01 billion (US$679 million) in net profit, up 72 percent from the NT$12.83 billion posted a year earlier, but down 59 percent from the NT$53.15 billion logged a quarter earlier.

In the first quarter, the smart consumer electronics division accounted for 48 percent of its total sales (NT$1.324 trillion), while the cloud and networking division comprised 28 percent, the computing division 18 percent and the electronics component division 6 percent, Hon Hai said.

During the same period, Hon Hai logged NT$10.5 billion in losses from its investments in Sharp after a loss of NT$19.7 billion booked over the same period last year, according to the tech giant.

In addition to AI servers, Wu said sales in cloud and networking devices and electronics components are expected to grow sharply from a year earlier in 2024. Revenue from computing products and smart consumer electronics items is expected to stay flat.

Wu said Hon Hai has also maintained a neutral view toward the information communications technology industry for this year.

In the EV business, Wu said Hon Hai is scheduled to unveil new models on the U.S. market in 2025 and will sign agreements with two clients in Japan in the second half of this year for contract design and manufacturing services (CDMS) in EV development.

Wu said Hon Hai is planning to extend sales of SUVs made on its Model C prototype, Crossover made on its Model B and electronic buses made on its Model T to the Southeast Asian, U.S. and European markets from Taiwan.

He said sales of SUVs on Model C are expected to hit NT$10 billion in 2024.

According to Hon Hai, an e-bus plant, which began construction in April in Kaohsiung and is scheduled to be completed in 2025, is expected to roll out 500 units a year in an initial stage. Production is expected to grow to 1,000 in 2028.

In the automotive IC business, Hon Hai said its Hybrid Virtual platform has partnered with a Tier 1 company to develop the third-generation silicon carbide (SiC) module, with clients from Taiwan, China and Europe planning to take advantage of the innovation.

Hon Hai said capital expenditure is expected to grow at least 14 percent from a year earlier in 2024 after a 14 percent year-on-year increase in 2023.