GB200 AI server shipments to start in Q4 as scheduled: Hon Hai

Taipei, Aug. 14 (CNA) In a move apparently designed to assuage concerns over the delay of GB200 AI server shipments due to a shortage of Blackwell graphics processing units (GPUs) from U.S.-based Nvidia Corp., Taiwan manufacturing giant Hon Hai Precision Co, said Wednesday it will start to ship the AI servers and work with the American partner will continue in the fourth quarter as scheduled.

At an investor conference, Hon Hai spokesman James Wu (巫俊毅) said he expects shipments of GB200 servers by the company to increase in the first quarter of next year and thereafter grow quarter by quarter.

Fears over a delay in shipments of GB200 servers surfaced in early August after tech website The Information reported that Nvidia told customers the roll-out of its Blackwell GPUs used in GB200 servers will be delayed by three months or longer due to unexpected design flaws.

The report caused a plunge in AI related stocks on the U.S. and Taiwan markets in recent sessions.

Wu said Hon Hai has no shipment delay problems.

"Hon Hai will definitely be the first GB200 server supplier in the world," he added.

Hon Hai's plans for AI server development remain on schedule, Wu said, adding that the company has close contacts with firms in the global supply chain, and to his knowledge, the supply structure is unchanged, with Hon Hai's shipments of GB200 servers to go ahead as planned.

Hon Hai has taken advantage of its efforts in AI server development, including a technology upgrade, integration of firms in the supply chain, smart manufacturing and investments worldwide, he added.

As a result, sales of AI servers grew more than 200 percent from a year earlier in the first half of this year, and growth momentum is expected to accelerate in the second half.

Hon Hai maintained its view that AI servers will make up more than 40 percent of its overall server revenue this year, and even better, strong demand for new-generation AI rack solutions from different types of customers is expected to make a significant contribution to the company's server revenue next year, Wu said

AI server sales could hit NT$1 trillion a year in the foreseeable future, he said.

Before the investor conference began, Hon Hai reported net profit hit the highestquarterly level ever, with NT$35.05 billion (US$1.09 billion) in Q2, up 59 percent from a quarter earlier and a rise of 6 percent from a year earlier.

In the second quarter, Hon Hai said, its net margin -- the difference between gross profit and total expenses including interest payments and taxes -- stood at 2.26 percent, up from 1.66 percent in the first quarter, but down from 2.53 percent a year earlier.

Also speaking at the investor conference, chief financial officer David Huang (黃德才) said Hon Hai improved its portfolio of components for AI server production and tightened operating costs so that its gross margin in the second quarter increased.

As of the end of June, Huang said, Hon Hai was sitting on about NT$1.05 trillion in cash and cash equivalents and its financial condition remains sound.

According to Huang, Hon Hai spent NT$63.1 billion in capital expenditure in the first half of this year, up 33 percent from a year earlier, with spending focused on production diversification to cater to different clients.

Meanwhile, Wu said the development of Hon Hai's three major platforms based on generative AI -- smart manufacturing, smart EV, and smart city -- is moving forward.

In smart manufacturing, Hon Hai has worked with multiple partners such as Nvidia, Google and Siemens, with the cooperation including introducing GenAI into production processes, building "robot+AI" platforms to improve automation capabilities, and constructing a new generation of digital factories, Wu said.

As for smart city, Hon Hai continues to promote comprehensive city-wide solutions and is currently discussing the establishment of smart city application proof of concept (PoC) with key cities in Mexico, he added.

In the semiconductor industry, the company's third-generation silicon carbide (SiC) module plant in Hsinchu is scheduled to start a trial run in the third quarter of this year, he said.