---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 167649
conversation_id: 66c5ec09-4ae8-441f-bf7f-bd0eaf467c61
citations: 0
created: 2026-05-31 19:13:55Z
---

# What’s the bull case bear case for FII?

**FII = Foxconn Industrial Internet (601138 CH)** — the A-share-listed Foxconn subsidiary that ODMs AI servers, telecom/networking equipment, and iPhone metal casings. Below is the bull/bear framework as articulated in CLSA's most recent dedicated FII note (2 May 2025), with CLSA still rated **Outperform**, TP cut from Rmb23.2 to **Rmb20.3** (14× 26CL PE) on lower multiple after AI capex and tariff concerns [1][4].

---

## Bull Case — "Three legs of an AI compounder"

**1. Tier-1 AI server / GPU board ODM with embedded scale advantages**
- A "key AI growth beneficiary with a solid long-term growth outlook as a leader in both AI server ODM and HPC GPU boards." CLSA flags FII as **major AI-server supplier for Amazon (40%+ share), Microsoft and Oracle**, a **dominant supplier in NVIDIA GPU card (over 80% share)**, and also supplies NVIDIA HGX/UBB GPU modules [2].
- Concrete delivery: **AI server revenue +162% YoY to Rmb153.0bn in 2024**, with AI server contribution climbing 13ppt YoY to 25% of total revenue. Cloud equipment revenue grew **+64% YoY to Rmb319.4bn** (52% of group) [1]. CLSA models 4.5mn Blackwell GPU shipments globally in 25CL, with 20K GB racks and ~350-400K 8-card HGX Blackwell servers — FII remains key supplier for both.
- Earnings already accelerating: 1Q25 revenue **+35% YoY to Rmb160.4bn**, net profit **+25% YoY to Rmb5.2bn** [8].

**2. iPhone metal casing share + ASP/mix upside**
- FII has **60-70% market share in iPhone metal casing**; the casing upgrade trend to higher-end materials feeds both **ASP and margin expansion** [2][4].
- 5G handset metal casing shipments grew **10% YoY in 2024** with stable share at the US major client [7].

**3. AI-related networking — high-speed switches/routers ramp**
- The "third leg": fast-growing high-speed switches/routers for AI networking. **400G/800G switch shipments grew multifold YoY in 2024**; FII also has rising DPU/NIC exposure [2][7].

**Forward catalysts** (CLSA-listed): (i) growing AI capex from North American CSPs; (ii) launch of killer Gen-AI apps (Sora, GPT-5) re-rating sentiment; (iii) expansion into new NVIDIA GPU product lines (B100, GB200); (iv) iPhone metal casing material upgrade lifting ASP/margin [2].

**Bull-case financial framework (CLSA estimates)** [9]:

| Metric | 2023A | 2024A | 2025CL | 2026CL | 2027CL |
|---|---|---|---|---|---|
| Revenue (Rmb m) | 476,340 | 609,135 | 753,187 | 860,365 | 883,252 |
| Net profit (Rmb m) | 21,040 | 23,216 | 26,006 | 28,767 | 30,063 |
| EPS growth (%) | 4.8 | 10.3 | 12.0 | 10.6 | 4.5 |
| ROE (%) | 15.6 | 15.9 | 16.3 | 16.6 | 16.0 |
| Dividend yield (%) | 3.2 | 3.5 | 4.0 | 4.4 | 4.6 |
| FCF yield (%) | 9.4 | 1.1 | 4.9 | 4.2 | 7.4 |

24% revenue CAGR 2023→2025CL, net profit compounding at low-teens through 27CL, ROE rising to 16-17%, dividend yield 4%+. **2024 payout ratio held flat YoY at 54.7% with dividends up 10% YoY to Rmb12.7bn** [10] — a non-trivial defensive feature for an AI-cycle name.

---

## Bear Case — "Three things that can break the multiple"

**1. AI capex deceleration into 26CL** — the explicit driver of CLSA's TP cut
- CLSA cut target PE from 16× to 14× "to incorporate our concern on **AI Capex growth slow-down in 26CL**" [4]. This is the single biggest risk to consensus: FII's 2025/26 growth is funded by NA hyperscaler GPU orders; any pullback in cloud capex compresses both volume and multiple.
- The 26CL revenue growth profile already drops to **+14.2%**, and 27CL to **+2.7%** [9] — the curve flattens fast if AI demand normalizes.

**2. Tariff / geopolitical overhang on the Apple business**
- CLSA cites "**near-term tariff uncertainties**" and "tariff policy uncertainty for Apple business" as a co-driver of the multiple cut [1][4]. While CLSA judges tariff impact on the AI server business as "limited" given FII's **Mexico factories**, the iPhone exposure remains tariff-sensitive [4].
- Listed risks include "**slower-than-expected iPhone shipments**" [3].

**3. Margin dilution from buy-and-sell AI server mix**
- Gross margin trajectory is **going the wrong way**: GPM 2024 8.1% → 2025CL 6.2% → 2026CL 5.8% → 2027CL 5.6%. Operating margin slides from 4.5% → 3.6% [5]. 1Q25 GPM was **down 0.9ppt YoY to 6.7%** with NPM down to 3.3%, "with increasing buy-and-sell business portion, in our view" [10] — i.e., revenue growth comes increasingly from pass-through GPU content, not value-added integration.
- This is structurally why CLSA can keep its absolute earnings forecast intact yet still cut TP — investors typically pay lower multiples for revenue with thinner margins.

**4. Execution risk: GB200 ramp not yet smooth + supplier competition**
- CLSA notes "GB racks' mass production seems still not very smooth" [4]. The 6-month delta vs the Oct 2024 note (which lauded FII as "first global vendor" to deliver GB200 racks) suggests timing slippage.
- Other listed risks: "slower 5G and AI adoption, and intensified competition" [3] — FII competes with Quanta, Wistron, Inventec, Supermicro etc., and customer concentration (Amazon, Microsoft, Oracle, NVIDIA) cuts both ways.

**5. Valuation no longer cheap on history**
- CLSA's new 14× 26CL PE multiple sits **slightly above the historical average of 13×** [6]. After the recent rally, FII trades around the upper end of its long-run band — the easy multiple-expansion trade is done, and from here returns must come from earnings delivery into a softening capex cycle.

---

## Net View

CLSA stays Outperform — the 3-legged AI/iPhone/networking thesis [2] plus 16%+ ROE and 4%+ yield [9] are intact — but the **margin trajectory and 26CL AI-capex visibility** are the two factors that drove the 12.5% TP cut [4][5]. The bull/bear debate ultimately hinges on whether you believe (a) NA hyperscaler AI capex extends through 26-27CL and (b) FII can hold its share of GB rack / HGX server / NVIDIA GPU module supply without ceding margin to competition.

---
**Sources**
[1] FII - O-PF (On track delivery) — CLSA (2 May 2025) — 607957908LinqAlpha.PDF
[2] FII - O-PF (On track delivery) — CLSA (2 May 2025) — Investment thesis catalysts
[3] FII - O-PF (On track delivery) — CLSA (2 May 2025) — Investment risks
[4] FII - O-PF (On track delivery) — CLSA (2 May 2025) — Valuation revise-down section
[5] FII - O-PF (On track delivery) — CLSA (2 May 2025) — Cloud equipment / AI server detail
[6] FII - O-PF (On track delivery) — CLSA (2 May 2025) — Valuation details
[7] FII - O-PF (On track delivery) — CLSA (2 May 2025) — AI networking business detail
[8] FII - O-PF (On track delivery) — CLSA (2 May 2025) — 2024/1Q25 results
[9] FII - O-PF (On track delivery) — CLSA (2 May 2025) — Summary financials table
[10] FII - O-PF (On track delivery) — CLSA (2 May 2025) — Quarterly results / dividend payout

