Foxconn has secured exclusive manufacturing rights from NVIDIA for the new NVLink switches used in their upcoming GB200 AI servers. This deal represents a significant opportunity for Foxconn, as NVLink production is expected to be highly lucrative, exceeding even the volume of GB200 server cabinet orders. The profit margins associated with NVLink production are notably higher than those from server assembly, promising substantial contributions to Foxconn’s overall profitability.

Foxconn has refrained from discussing specifics regarding its orders or customer relationships, though industry analysts have noted the distinctive aspects of NVIDIA’s new NVLink technology. This advanced technology comprises two critical components: bridge technology that links CPUs and AI chips, and switch technology pivotal for interconnecting GPUs. Together, these innovations enable thousands of GPUs to collaborate seamlessly, significantly amplifying AI computing capabilities. NVLink stands out as a transformative technology in this regard, reflecting the deepening collaboration between Foxconn and NVIDIA over the years. As NVIDIA gears up to further consolidate its dominance in the AI industry, NVLink represents a pivotal advancement propelling this trajectory to new heights.

Due to Foxconn’s prominent role as an OEM in network communication equipment, NVIDIA naturally entrusted the relevant orders to them. Each GB200 AI server cabinet alone necessitates 7 NVLinks, indicating that Foxconn’s volume of GB200 AI server cabinets exceeds the NVLink switch orders by a factor of 7.

Given the higher gross margin ratio associated with NVLink switches compared to server assembly, this aspect of their business will notably impact Foxconn’s operations.