TAIPEI (TVBS News) — Hon Hai Technology Group, also known as Foxconn, announced on Tuesday (Feb. 27) a significant investment in Mexico to bolster its AI server production capabilities.
In a statement posted on the Taiwan Stock Exchange (TWSE), the world’s largest contract electronics manufacturer revealed that it had acquired land in El Salto, Jalisco, for NT$827 million (approximately US$27 million) through its subsidiary Industrial FII AMC Mexico S. DE. R.L. DE C.V.
This move aligns with Hon Hai’s strategy to capitalize on the booming demand for AI servers fueled by the global surge in generative AI applications. The company sees Mexico as a strategic location for this expansion due to its cost competitiveness and favorable production environment.
The land acquisition in El Salto complements Hon Hai’s existing presence in Mexico. The company’s server-related subsidiary, Ingrasys, established a presence in the area in 2021, highlighting the company's long-term commitment to the region.
This expansion caters to the projected growth in the global AI server market, with major cloud service providers such as Microsoft, Amazon, Google and other enterprises expected to continue increasing their capital expenditures for AI applications and general data processing. Hon Hai is a key player in this market, with an estimated share of 40%.
Hon Hai’s investment in Mexico is part of a broader plan to diversify its business and expand its global footprint. In addition to the land acquisition, the company received approval from the Ministry of Economic Affairs Investment Review Committee to invest NT＄15 billion (approximately US＄475 million) in its Singapore holding company, including indirect investments in the automotive components sector.
Foxconn, the Taiwan-based global electronics manufacturing giant, has announced an investment of approximately NT＄827 million (US＄26.52 million) in the acquisition of 127,500 square meters of land in El Salto, Mexico. This move, announced by its subsidiary FII AMC Mexico S. DE. R.L. DE C.V., signifies Foxconn’s ambitious strategy to expand its global AI server manufacturing footprint.
The new site in El Salto, southwestern Mexico, is expected to bolster Foxconn's server-related production capabilities, potentially including a wide array of server-related products.
Supply chain professionals view Mexico as an advantageous production location because of its closeness to the U.S. market and affordable labor costs. This is especially pertinent given the high demand for server-related products, including AI servers, amidst clients' search for optimal production locations.
The investment aligns with the company's broader vision to expand its global manufacturing footprint and capitalize on the burgeoning demand for AI servers driven by the AI application boom. The choice of Mexico for this expansion is strategic, considering the current global political and economic landscape.
Foxconn's investment in Mexico is not an isolated event but part of a larger, well-thought-out plan that has been in the making for some time. The company's server-related product manufacturing subsidiary, Hongbai, had already
established a presence in the area in 2021, indicating long-term planning and commitment to the region. This expansion is poised to cater to the growing market demand for AI servers and general servers, as the main CSP operators' capital expenditures for AI applications or general data processing needs are anticipated to maintain a growth trajectory in the coming years.
Mexico's advantageous position is underscored by its cost competitiveness compared to the U.S., a factor that Foxconn is leveraging to its benefit. Unlike many manufacturers concentrated at the U.S.-Mexico border, El Salto's location offers a less tight supply of labor and other resources, further enhancing its attractiveness as a production hub.
In addition to the Mexican land acquisition, the Ministry of Economic Affairs Investment Review Committee approved Foxconn's NT＄15 billion investment in its Singapore holding company. This move includes indirect investments in a 50% stake in a subsidiary of the German ZF Group, thereby indirectly acquiring half of the equity in ZF Automotive Chassis (Shanghai) Co., Ltd. and engaging in the wholesale and retail of automotive components. This series of investments underscores Foxconn's strategic diversification and expansion efforts, positioning it to effectively meet the evolving needs of the global market and its customers.