Foxconn plans up to $3 billion in yearly AI spending as chair anticipates a China EV shakeout

Foxconn shifts its focus

It is not every day that a major tech manufacturer makes a move this bold. Foxconn plans to spend $2 to $3 billion a year on AI as part of a major long-term strategy.

According to Reuters, Liu explained that AI will take up more than half of the company’s yearly capital spending. He also said Foxconn is redirecting resources because its AI server business is growing faster than its consumer electronics business.

AI spending takes the lead

Foxconn has begun reshaping its budget in response to rapid changes in its business. Liu said AI will account for the majority of Foxconn’s investment over the next 3–5 years, representing over half of the company’s roughly US$5 billion annual capital expenditure.

Liu said this shift reflects the strong demand for AI servers and cloud systems. He noted that this business has already surpassed consumer electronics revenue for two straight quarters as the company adjusts to global market trends.

AI servers surge in revenue

Foxconn’s AI server division is now its top-earning segment. According to Benzinga, the unit generated more than NT$700 billion in the second quarter of 2025.

The report stated that this performance pushed the business ahead of the smart consumer electronics segment. Trade coverage pegs cloud and networking growth at 40–50% year-over-year in Q2, reflecting a step-change in AI server demand.

EV market pressure in China

Competition inside China’s electric vehicle market has intensified. Liu said, ‘They’re not making money,’ and forecasted consolidation soon in China’s crowded EV market.

He noted that limited government support cannot sustain every startup in such a crowded space. Liu also predicted that a consolidation period could arrive soon as weaker players exit and the market becomes more stable.

BYD faces new challenges

BYD’s Q3 2025 profit fell 32.6% y/y, the biggest quarterly drop in over four years, and it cut its 2025 sales target to 4.6 million units, per Reuters.

It added that rising competition from domestic rivals continues to squeeze the company despite its strong market presence.

Foxconn delays EV target

Foxconn delayed its 5% global EV share goal in November 2024, citing slower demand and a focus on securing OEM orders.

Liu said the company is waiting for market conditions to improve before increasing investments. He also mentioned that global EV demand has slowed, making the current environment difficult for aggressive expansion.

Outsourcing could reshape EVs

Liu believes the electric vehicle industry may follow an older pattern. Liu likened today’s EV landscape to early PC markets, saying in-house production becomes unsustainable and outsourcing accelerates as competition rises.

He explained that rising costs may prompt some carmakers to consider outsourcing their operations. Liu noted that Foxconn helped pioneer outsourced PC production in the 1990s and said a similar shift could occur in the EV industry as competition intensifies.

Japan discussions underway

Foxconn is exploring new international opportunities. Liu said the company is in talks with Japan’s government about possible AI and EV-related investments.

He stated that local production of AI systems is important for data handling and security needs. Liu did not share details about the ongoing discussions but confirmed that these conversations align with Foxconn’s long-term strategy.

AI infrastructure expansion

Foxconn is investing significant resources in advanced computing. In October 2025, Foxconn’s board approved up to NT$42 billion (US$1.37 billion) for an AI compute cluster and supercomputing center, funded from December 2025 to December 2025. 2026.

The report stated that this commitment marks a significant shift in the company’s business priorities. It also noted that Foxconn is focusing on long-term capability building as AI demand grows across multiple industries.

Cloud and networking growth

Foxconn’s cloud and networking business continues to gain momentum. According to Reuters, this division, which includes AI servers, has outperformed the consumer electronics sector for two consecutive quarters.

Liu said the change shows how quickly the company’s revenue mix is evolving. He added that AI infrastructure is becoming central to Foxconn’s strategy as global companies increase demand for advanced computing support.

Learning from the PC industry

Liu believes past technology cycles offer key lessons. Liu said, ‘once they start outsourcing with one successful example, the others will follow,’ drawing a direct PC-to-EV analogy.

He explained that outsourcing enabled PC companies to reduce costs and remain competitive. Liu stated that the EV industry may follow this path once a successful outsourcing example encourages other automakers to do the same.

Holding steady with EV plans

Foxconn is not abandoning electric vehicles despite current challenges. The company is simply waiting for better conditions before ramping up production investments.

Liu said Foxconn may expand into areas such as robotics or quantum computing, while monitoring trends in the EV market. He noted that the company remains committed to long-term EV development even during a slower demand cycle.

Foxconn partners with Elektrobit to co-develop its next-generation EV platform. Read to find more about it.

China’s crowded EV field

The pressure on EV companies in China is becoming more visible. According to Benzinga, Liu said too many automakers are chasing too little profit.

He explained that government support is not strong enough to sustain every brand. The report also highlighted Liu’s view that consolidation is coming as startups run out of resources in the world’s largest EV market.

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This slideshow was made with AI assistance and human editing.