Foxconn, Apple’s biggest supplier, has secured an exclusive order to supply Apple’s AI servers, which will ship from the company’s Vietnamese factory, Taiwanese media outlet Economic Daily News reported on Monday. Apple’s demand for AI servers and data centers has increased significantly as the company expands its investment in AI development.
Why it matters: The upsurge of generative artificial intelligence products has swept the technology industry in 2023. ChatGPT, the large language model from OpenAI, was estimated to have 100 million monthly active users in June, making it the fastest-growing application in history. In due course, Apple plans to apply its heavy investment in AI research to products including the iPhone and iPad, according to the Financial Times.
Details: As Apple’s largest supplier, Foxconn not only assembles iPhones but also acts as a server supplier for Apple’s data center, according to the Economic Daily News report. With Apple’s recent stepping up of its interest in AI applications, the need for Foxconn’s support has increased.
- Foxconn has taken the global lead in the AI server market. The manufacturer already accounts for approximately 40% of the global server market, according to Reuters. Foxconn also provides AI servers for major tech companies including OpenAI, Nvidia, and Google.
- Apple CEO Tim Cook confirmed last week that the company has been studying various AI technologies including generative language models for years. Industry observers have speculated that the tech giant’s increase in AI investment may have contributed to its R&D expenditure reaching $22.61 billion last quarter.
- Apple is reportedly building a large-scale voice model named Ajax and is expected to launch a generative chatbot soon. Given Apple’s large user base around the world, this puts potential pressure on Google and Microsoft as the tech titans also look to launch similar AI offerings.
- There are more than 1.46 billion active iPhone users worldwide as of 2023, according to data from analytics firm Demand Sage. iPhone users account for 21.67% of the world’s total smartphone population, according to the same report. Apple’s mature App Store ecosystem also gives it an advantage over other companies in rolling out AI applications.
- Foxconn’s server revenue reached RMB 1.1 trillion ($138.64 billion) last year. According to industry estimates cited by the Economic Daily News, its AI server-related orders surged by billions of dollars in 2022.
- Apple is recruiting for dozens of AI-related jobs in its offices across California, Seattle, and Paris. New recruits are expected to engage in the research of large language models that can generate text, images, or codes in response to simple user prompts.
Context: Securing an AI server order from Apple has solidified Foxconn’s leading position as a supplier of AI servers. On August 4, Nvidia shifted some of its AI server orders from its manufacturing partner Wistron to a subsidiary of Foxconn, due to concerns over Wistron’s insufficient production capacity.