Foxconn, Apple’s largest iPhone manufacturer, said it is facing a shortage of AI chips for servers but expects business to be “slightly better” than last year.

Foxconn Chairman Liu Young-way said its server business had been performing well this year but is facing an AI chip shortage.

Talking to reporters at Foxconn’s annual employee party in Taipei on Sunday (4 February), Young-way said: “When it comes up to keeping up with demand, perhaps there need to be new factories.”

The Foxconn boss noted that only a few companies will be able to obtain enough NVIDIA AI chips to sustain demand this year.

Young-way said the global economic uncertainty will affect consumer demand, despite demand for AI servers remaining high.

The announcement comes as research company GlobalData predicts that 2024 will be the year of the ‘AI chip race’, a transition from the ‘AI arms race’ in 2023 which saw companies rush to create their own large language models.

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This will be seen in not only Big Tech companies, but also amongst startups that will look to create their own proprietary chips, according to GlobalData’s report, 2024 Enterprise Predictions: Artificial Intelligence.

The research company predicts that Nvidia will become less of a dominant force in the industry.

“As companies of all sizes work to reduce their dependence of Nvidia, alternative chip architectures will grow stronger, with CPUs, ASIC chips, and other designs gaining more ground,” the report stated.

Foxconn said that it expected a drop in first quarter revenue from last year. Foxconn reiterated in a statement that the first quarter is traditionally less impactful.

The company said it was “gradually entering the traditional off-peak season, and seasonal performance is expected to be similar to that of the past three years”.

Foxconn reported revenue of $16.6bn in January, marking its second-highest result for that period.