Nvidia and iPhone maker Foxconn tie up to build ‘AI factories’

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Nvidia and iPhone maker Foxconn have said they will build “artificial intelligence factories” together as the Taiwanese electronics manufacturer seeks to diversify its business.

The announcement comes a day after the US said it was tightening rules on AI chip sales to China, in a blow to Nvidia and other companies selling high-performance semiconductors in the country.

Nvidia co-founder and chief Jensen Huang said on Wednesday that the $1.1tn chip group would set up “AI factories”, or large data centres, with Foxconn to train autonomous vehicles, robotics platforms and large language models.

Huang, wearing his trademark leather jacket, made an appearance at Foxconn’s annual tech day on Wednesday in Taipei. He joined Foxconn chair Young Liu on stage to talk about the “beginning of a new computing revolution”.

Foxconn will use Nvidia’s latest chips and enterprise software to build what it called “a new class of data centres powering a wide range of applications”. Liu did not explain how these data centres would differ from existing rival ones that use Nvidia’s technology.

Foxconn is working to transform from a “manufacturing service company into a platform solution company”, according to Liu, who unveiled an electric cargo van to join the company’s existing fleet of EVs and said its low-earth orbit satellite was ready to launch next month.

Best known as the maker of the iPhone, Foxconn is trying to diversify its revenue base from manufacturing electronics to building the computing infrastructure powering autonomous technology, including vehicles.

It is facing increasing competition in its core business of contract manufacturing. Foxconn’s Chinese rival, Luxshare Precision Industry, has been steadily expanding its business with Apple, becoming an important partner and alternative supplier, including for Apple’s new Vision Pro mixed-reality headset.

Apple chief Tim Cook appeared in Zhejiang province on Wednesday at a Luxshare factory, according to domestic media reports. Cook has been visiting Apple partners and stores in the country, weeks after news emerged that Beijing was banning the company’s devices in several government agencies and state-owned enterprises.

The tie-up comes at a critical time for Nvidia, best known for its graphic processing units, the semiconductors training large AI models such as OpenAI’s ChatGPT. Nvidia is the leading global supplier for AI chipsets.

Washington has tightened restrictions on exports of Nvidia’s GPUs to China to halt the country’s progress in developing AI, which it claims could be harnessed for military use.

The US commerce department on Tuesday extended sweeping export controls first implemented in October last year. Officials said Nvidia would be banned from selling to China its A800 and H800 GPUs, the modified versions of its more powerful chips which are already banned in the country.

Semiconductor-related stocks in Asia sold off after the US expanded the controls, prompting Nvidia to warn the new rules could interfere with new product development.

Hong Kong-listed shares of Lenovo, which relies on Nvidia chips for one of its upcoming products, fell 7 per cent on the news, while Taiwanese chipmaker TSMC dropped 1 per cent and South Korea’s SK Hynix retreated 2 per cent.

The declines followed an almost 5 per cent drop for Nvidia on Tuesday after the chipmaker warned tighter controls “may impact the company’s ability to complete development of products in a timely manner”.

The warning also prompted analysts at Citigroup to cut their target price for Nvidia shares by almost 9 per cent to $575, warning that the new US government restrictions “will make it more difficult for Nvidia to sell to China”. The target price was above the current share value of $446.