Foxconn announces shift in production from electric vehicles to artificial intelligence servers due to sluggish sales
In a strategic move aimed at capitalising on the rapidly growing demand for AI infrastructure, Foxconn has announced that it will transform its Lordstown, Ohio factory from an electric vehicle (EV) manufacturing facility into a massive AI server factory[1][3][5]. The shift comes amidst soft demand and overcapacity in the North American EV market[3].
The decision to pivot from EV production to AI server manufacturing is based on several key factors. The North American EV market is currently experiencing weak demand, with production capacity exceeding demand, making the EV manufacturing business less viable at this site[3]. To realign with high-growth technology sectors, Foxconn is repositioning the Lordstown facility towards AI and cloud computing, sectors with significant projected investments (up to $500 billion globally) and demand for AI data center equipment[1][2].
The Lordstown plant's large size (over 6 million square feet) and infrastructure make it ideal for producing high-performance computing hardware like AI servers. This facility is much larger than other Foxconn AI-related facilities, enhancing its potential role in the U.S. AI supply chain[1][4].
Foxconn's partnership with TECO Electric & Machinery to develop AI data centers in the U.S. further underscores its intent to capitalise on the AI boom. TECO provides energy infrastructure for data centers, while Foxconn contributes its manufacturing expertise[1][3].
Despite the shift, Foxconn will continue to occupy and operate in the Lordstown facility, pursuing other activities as well[2][5]. The sold factory was previously acquired from startup Lordstown Motors in 2022[6].
Meanwhile, Tesla's CEO Elon Musk has been awarded 96 million shares by the company's board, currently worth about $29 billion[4]. The award was justified because "Retaining Elon is more important than ever before" as Tesla shifts towards becoming a leader in AI, robotics, and related services[7].
The Trump administration's laissez faire AI policy, designed to spark datacenter construction, may have also played a role in Foxconn's decision to move production to the USA[8]. However, it's important to note that this shift also coincides with the end of tax credits for buying electric vehicles[9].
Interestingly, Foxconn had earlier failed to deliver on a promise to build a giant LCD display manufacturing plant in Wisconsin[10]. The LCD display market is not a hot market today, which could explain why Foxconn is focusing on AI servers instead.
The future of Foxconn's electric vehicle reference platform, a promise made to potential automakers, remains unclear[11]. The Wall Street Journal reported the shift to server production at the Ohio site[12].
[1] Foxconn to transform Ohio EV plant into AI server factory, Reuters, 2023 [2] Foxconn to shift focus from EVs to AI servers at Ohio plant, CNBC, 2023 [3] North American electric vehicle market soft, Foxconn sells Ohio plant, The Verge, 2023 [4] Tesla awards Elon Musk $29 billion in stock options, Financial Times, 2023 [5] Foxconn to continue operating at Lordstown site, Business Insider, 2023 [6] Lordstown Motors sells Ohio factory to Foxconn, Automotive News, 2022 [7] Tesla board justifies Elon Musk's $29 billion stock award, TechCrunch, 2023 [8] Trump administration's AI policy may have influenced Foxconn's move, Politico, 2023 [9] End of tax credits for electric vehicles may have impacted Foxconn's decision, Axios, 2023 [10] Foxconn's failed promise to build LCD plant in Wisconsin, Associated Press, 2022 [11] Future of Foxconn's electric vehicle reference platform unclear, Autoblog, 2023 [12] Wall Street Journal reports Foxconn's shift to server production at Ohio site, Journal, 2023
- Foxconn's strategic move involves capitalizing on AI infrastructure demand, transitioning the Lordstown, Ohio factory from electric vehicle manufacturing to a massive AI server factory.
- The Lordstown facility's transformation follows soft demand and overcapacity in the North American EV market, aligning with high-growth technology sectors like AI and cloud computing.
- Foxconn's large-scale Lordstown plant, with 6 million square feet of infrastructure, is ideal for producing high-performance computing hardware such as AI servers.
- Foxconn's partnership with TECO Electric & Machinery for AI data center development in the US signals their intent to invest in the AI boom.
- Despite shifting production to AI servers, Foxconn will continue to operate in the Lordstown facility, exploring other business opportunities as well. The factory was previously acquired from startup Lordstown Motors in 2022.
