富士康增强制造实力，进军人工智能领域；首次覆盖评级为增持，目标价14美元

Restricted - External Initiating CoverageHNHPFOVERWEIGHTfrom Not RatedChina TechnologyPrice TargetPrice (20-May-25)Potential Upside/DownsideSource: Bloomberg, Barclays ResearchMarket Cap (USD mn)Shares Outstanding (mn)Free Float (%)52 Wk Avg Daily Volume (mn)Dividend Yield (%)Return on Equity TTM (%)Current BVPS (USD)Source: BloombergPrice PerformanceExchange-Nasdaq52 Week rangeUSD 14.16-6.75Source: IDCLink to Barclays Live for interactive chartingChina TechnologyJiong Shao, CFA+1 212 526 5562jiong.shao@barclays.comBCI, USLian Xiu (Roger) Duan+1 212 526 4633lianxiu.duan@barclays.comBCI, USXinyao Song+1 212 526 6972xinyao.song@barclays.comBCI, US disruption in the tech industry and the leaderboard may change. But as long as a physical techproduct needs to be made, we expect Foxconn to be there making it.To us, Foxconn is primarily a volume, scale, and revenue growth story with stable margins (6%gross margins and 3% operating margins). Because of its mostly buy-and-sell assembly modeland already extra-thin gross margins, we believetariffswill likely have a limited impact on thecompany’s margins as its customers will need to absorb whatever negative impact ensues fromtariffs.Lastly, from a shareholder-return perspective, the company pays out over 50% of itsearnings as an annual dividend, with a current dividend yield of around 4%. Our price target of$14 is based on a 12x FY26 P/E multiple, in line with industry OEM peers, although Hon Hai hasno real comparables. Considering that we expect the company to grow its total revenues in themid-teens and net income in the high-teens to 20% range for the next couple of years, thesemultiples seem attractive. 2 Investment Thesis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Company Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Smart Consumer Electronics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Cloud and Networking Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Computing Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Components and Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28TariffImpact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Financials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Valuation Methodology and Price Target. . . . . . . . . . . . . . . . . . . . . . . . . . . 35Investment Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Management Team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 Investment ThesisAI servers have become the primary growth driver for Foxconn, which has captured40% market shareFoxconn has full stack production capabilities across the entire AI server supply chain, includingGPU modules, AI servers, server racks, networking/switches, liquid cooling systems and datacenters. In fact, AI servers have emerged as the company's primary growth driver. In 2024, cloud& networking product segment revenue increased 45% yoy, contributing 30% of total revenue.Within that segment, AI server revenue surged more than 150% yoy and Foxconn secured about40% market share. Looking into 2025, Foxconn expects cloud & networking segment to achievesimilar revenues with smart consumer electronics. That indicates potentially 59% yoy revenuegrowth per our estimates, representing 40% of total revenue. We forecast AI server revenue tonearly double yoy and gain further global market share to more than 40%, supported by morecontract shares in GB300 AI servers (2H25) vs GB200 (2025).In fact, AI server assembly is very complicated and capital-intensive, setting high entry barriersin the industry. Leveraging decades of expertise in electronics and server assembly, as well as astrong balance sheet, Foxconn is well positioned to capitalize on the AI hardware tailwind.AI server demand remains solid in 2025 despite globaltarifftensions; customerbase expanding beyond large CSPs and brands to mid-sized companiesDeepSeek'scost-effectivebreakthroughs have accelerated AI adoption across companies of allsizes. Previously, Foxconn's AI server orders were largely attributable to large cloud serviceproviders (CSPs) and tier-1 brand customers. Now with better order visibility, it has seensustained demand from these large customers, which is not peaking this year. Despite globaltariffturbulence, servers remain insulated for now and are exempted from reciprocaltariffs.Foxconn's resilience stems from its diversified production in Mexico and the US and fromsourcing its components in Taiwan and Vietnam. End demand remains strong, supported byunchanged or increased capex plans from hyperscalers as anno