Foxconn and TECO Forge Strategic Alliance to Advance AI Data Center Solutions Through Share Swap Deal
Hon Hai Technology Group, better known globally as Foxconn (TWSE:2317), and TECO Electric & Machinery Co Ltd (TWSE:1504), have jointly announced a major strategic alliance through a share exchange agreement aimed at significantly boosting their capabilities in artificial intelligence (AI) infrastructure. This partnership is designed to propel both Taiwanese tech giants into leading positions in the rapidly growing global supercomputing and AI data center (AIDC) sectors.
The newly announced alliance combines the complementary strengths of both companies. Foxconn, widely recognized as the world’s largest electronics manufacturing service provider and a dominant force in AI server production, will join forces with TECO, a leading name in industrial electro-mechanical engineering and green energy innovation. By capitalizing on the trend toward standardization and modularization in global data center development, the companies plan to collaboratively seize opportunities in the AIDC space.
Share Exchange Details Solidify Strategic Cooperation
The alliance is formalized through a no-cash share swap transaction, approved by the respective boards of both companies. As part of the deal:
- TECO will acquire a 0.519% stake in Hon Hai Precision Industry Co Ltd, which is Foxconn’s listed name on the Taiwan Stock Exchange.
- In return, Foxconn will acquire a 10% equity stake in TECO.
- TECO will issue 237,644,068 new shares to Foxconn, while Foxconn will issue 72,481,441 new shares to TECO, resulting in a share exchange ratio of approximately 1 to 0.305.
The transaction is expected to close in the fourth quarter of 2025, subject to regulatory approvals.
Driving a Unified Vision for Modular AI Infrastructure
With the global demand for AI data centers expanding at an unprecedented rate, speed and flexibility in deployment have become essential. Foxconn Chairman Young Liu emphasized the growing importance of modular architecture in data center development.
“Time-to-market is key in the global supercomputing race. Modular design is gaining popularity. As AI data centers grow in size and demand ramps higher, teaming up with TECO means both companies are able to level up and rapidly deliver comprehensive, vertically-integrated solutions to our customers – the Tier-1 cloud service providers (CSPs) and hyperscalers,” Liu said.
Foxconn aims to deepen its focus on modular AI data center architecture and will expand its offerings from server components and racks to full-scale data center construction. This partnership with TECO is seen as a catalyst to achieve that goal.
TECO’s Industrial Expertise Complements Foxconn’s Global Reach
For its part, TECO brings decades of engineering prowess in energy-efficient systems, electromechanics, and smart factory technologies. TECO Chairman Morris Li stated that this alliance extends their cooperation beyond traditional industrial sectors into cutting-edge AI infrastructure.
“Changing global dynamics are creating new opportunities for business and cooperation. This strategic partnership extends our collaboration into low-carbon smart factories and energy services, and now positions us to provide one-stop solutions for next-generation data centers,” Li noted.
TECO-Westinghouse, based in Texas, provides additional leverage. As a well-established U.S. manufacturer of industrial electric motors, its American presence complements Foxconn’s U.S. manufacturing operations. The companies believe their combined footprint in the U.S. will strengthen supply chain resilience and promote the reshoring of advanced manufacturing.
Target Markets and Joint Expansion Plans
The alliance will initially focus on Taiwan, broader Asia, the Middle East, and the United States. These regions represent high-growth markets for data infrastructure and AI applications.
The two companies plan to collaborate on establishing data centers in both Taiwan and the U.S., bringing together expertise in AI servers, energy-efficient electromechanical systems, and information and communication technologies (ICT).
Foxconn will contribute its vertically integrated supply chain and deep customer relationships in the AI server space, while TECO will offer its capabilities in smart energy, green power, and mechanical-electrical integration to support modular and scalable data center builds.
Sustainability and Innovation at the Core of the Alliance
The partnership is also rooted in a shared commitment to sustainability and carbon reduction. Both Foxconn and TECO have previously collaborated on energy-saving solutions and ESCO (Energy Service Company) projects, laying the foundation for future green innovation.
As the alliance advances, the companies aim to create a low-carbon, smart industry value chain, aligned with global climate goals and environmental standards. Their inclusion in the S&P Global Sustainability Yearbook 2025 underscores this commitment, recognizing both for excellence in corporate sustainability practices.
Integration with Foxconn’s “3+3+3” Strategy
Foxconn’s ongoing “3+3+3” strategy—which refers to three emerging industries (EVs, digital health, and robotics), three core technologies (AI, semiconductors, and next-gen communications), and three global regions—could also benefit from this strategic tie-up. Future collaboration may include extending joint development into these areas, particularly as data centers become central to enabling AI, edge computing, and other emerging technologies.
By leveraging their combined strengths, Foxconn and TECO are positioning themselves to become major players in the next generation of digital infrastructure. This partnership is expected to enable faster project delivery, cost-effective deployment, and more resilient, sustainable operations, which will be crucial as the world’s demand for computing power continues to soar.
