For stock investors, the Gold Kirin analyst reports offer authoritative, professional, timely and comprehensive insight to help uncover potential thematic opportunities. Source: Yema Finance. Why is the United States making things difficult for Chinese AI computing hardware makers? Author: Jia Zicong. The flames of a patent war have reached two "Apple chain giants."
On October 9, the United States International Trade Commission (ITC) formally launched a Section 337 investigation, case number 337-TA-1526, in response to a patent infringement claim by the American power supply maker Vicor, targeting vertical power delivery systems and related computing systems. Image source: Foxconn Industrial Internet. If the ITC finds infringement, it can issue a limited exclusion order or a general exclusion order barring the products at issue from passing through U.S. customs. Those named include not only two Chinese "Apple chain giants," LUXSHARE ICT (2475.HK) and Foxconn Industrial Internet Co.,Ltd. (601138.SH), but also about 20 companies such as Delta Electronics, Infineon and MPS, so the action is not aimed only at Chinese companies.
Both companies responded swiftly, saying the products at issue are still in the verification stage and have not yet entered mass production, and that the matter is not expected to have a major adverse impact on current operations or results for the period. As of October 12, Foxconn Industrial Internet Co.,Ltd. closed at 52.05 yuan per share, down 7.17%, with a total market value of 1.03 trillion yuan; LUXSHARE ICT closed at HK$49.5 per share, down 2.08%, with a total market value of HK$383.3 billion.
What does a Section 337 investigation mean?
The timeline from filing was tight. On the evening of October 10, LUXSHARE ICT first announced on the Shenzhen Stock Exchange that the company and its controlling subsidiary Dongguan Luxshare Technology had been listed as respondents, saying the products at issue are mainly integrated power supply solutions for power modules and processors used in the data center field, are currently in the customer verification stage and have not entered mass production, and are not expected to have a major adverse impact on the company's current operations or results for the period. One day later, on the evening of October 11, Foxconn Industrial Internet Co.,Ltd. announced on the Shanghai Stock Exchange that the products at issue are still in the internal verification and evaluation stage and will not have a substantive impact on the company's current operations or results, and that the respondents also include three of its controlling subsidiaries: Foxconn Industrial Internet USA, Ingrasys Technology and Ingrasys Technology USA. Both companies reminded investors that the investigation is still at an early stage and the outcome is uncertain.
The number 337 is not unfamiliar to Chinese companies going global. It comes from Section 337 of the U.S. Tariff Act of 1930, under which the ITC investigates whether imported products infringe U.S. intellectual property rights or involve other unfair trade practices. Unlike ordinary patent litigation, a Section 337 investigation does not require proof of harm and moves faster; from filing to final determination it usually goes through discovery, hearings, an initial determination by an administrative law judge, ITC review, final determination and presidential review, often taking more than a year. Yet the remedies are harsher. The most important is the exclusion order, which can bar the products at issue from the U.S. market, along with cease-and-desist orders and consent orders. For a manufacturer that depends on the U.S. market, once an exclusion order lands, the blow is direct. Image source: Canned Image Library.
The investigation points to vertical power delivery (VPD), one of the key directions in the evolution of AI data center power architectures. As rack power density rises rapidly with each GPU generation, traditional lateral power delivery is approaching its limits in terms of loss and space occupation, and vertically integrating power modules behind the processor so that current passes through the chip vertically has become a mainstream exploratory path. Vicor is a long-established patent holder on this technology route and has previously launched multiple Section 337 investigations against supply chain companies over data center power-related technologies. Some brokerage research notes argue that this is in fact a routine patent royalty dispute by Vicor against nearly 20 companies worldwide rather than targeted sanctions; the VPD products at issue for LUXSHARE ICT are still in the sample delivery stage, the impact on current profit is less than 1%, and the fact that the company has been sued itself proves that its VPD technology has passed verification by North American customers.
Zooming out, the VPD dispute is essentially a contest over influence in AI computing hardware. As the power supply current for a single GPU approaches the kiloampere level, power delivery is evolving from low-voltage direct current to high-voltage direct current, boosting voltage at the front end to reduce current and using near-distance power delivery at the back end to reduce resistance. Some institutions estimate that by 2030 the VPD-related market will be worth about US$8.1 billion, and the power architecture competition has already reached the level closest to the chip. Whoever secures customer certification and patent influence at that level will secure a place on the bill of materials for the next generation of AI servers. That also explains why Vicor chose the moment when AI server volumes are growing fastest to cast a patent net across the entire supply chain.
Who are the two "Apple chain giants"?
To understand this storm, one must first see clearly who the two targeted companies are. LUXSHARE ICT is headquartered in Dongguan, Guangdong, and was founded by Wang Laichun. The founder was once a worker on a Foxconn production line; starting from connector trading and manufacturing, she formally established Luxshare in 2004 and listed it on the Shenzhen Stock Exchange in 2010. It began with consumer electronics connectors, gradually won Apple AirPods contract manufacturing orders, and then extended its reach into complete iPhone assembly, Apple Watch and mixed reality headsets, forcibly taking meat from established contract manufacturers; Wang Laichun is also called the "Apple Chain Queen" by outsiders. On the 2026 Hurun Global Rich List, Wang Laichun ranked 232nd with wealth of 91 billion yuan. Image source: Hurun Global Rich List. But the ambition of LUXSHARE ICT has never been limited to contract manufacturing for Apple. It successively acquired Wistron's iPhone assembly plants in Kunshan and Taichung, securing a key ticket to complete-device contract manufacturing; it also formed a joint venture with Chery and acquired overseas auto parts assets, entering body control, smart cockpits and high-voltage wiring harnesses, betting its second growth curve on automotive electronics. On the communications side, its optical module and power businesses have risen with AI computing demand. Its global production footprint, with plants in Vietnam, Mexico and India, was originally its card to hedge against trade friction and a buffer that repeatedly allowed it to land softly in past external shocks.
The other company, Foxconn Industrial Internet Co.,Ltd., is the A-share listed platform of the Hon Hai (Foxconn) system and listed in 2018. Unlike the Apple chain label of LUXSHARE ICT, the core of Foxconn Industrial Internet Co.,Ltd. is cloud computing and communications equipment manufacturing, especially AI servers. In Nvidia's computing arms race, it is a major contract manufacturer of liquid-cooled AI servers and cloud networking equipment, deeply tied to the global wave of AI capital expenditure. Its contract manufacturing nature means its gross margin is not high, but its scale and positioning are enough to make it a name that cannot be avoided in this track. Super factories in Zhengzhou, Shenzhen and Ganzhou, as well as overseas capacity in Vietnam and Mexico, form the physical foundation for serving global cloud giants. The soul figure of Foxconn Industrial Internet Co.,Ltd., Hon Hai founder Terry Gou, is a contract manufacturing king who has topped Taiwan's richest list several times, and he was once Wang Laichun's former boss and early investor; Wang Laichun once said that "everything about the factory was learned from Foxconn." On the 2026 Forbes Global Rich List, Terry Gou returned to the position of richest person in Taiwan with a fortune of US$15.3 billion, ranking 190th globally. On the 2026 Hurun Global Rich List, Terry Gou ranked 175th with wealth of 110 billion yuan. Image source: Hurun Global Rich List.
It is no accident that these two companies were targeted by Vicor at the same time. Both are benchmarks for China's electronics manufacturing going global and key links in the supply chains of American technology giants; their rising market share and patent influence are bound to invite friction. This time, however, the smell of gunpowder is more concentrated: the two represent exactly two directions in which Chinese manufacturing is moving outward, one in the capillaries of consumer electronics and the other on the main artery of AI computing.
The quality of the two companies amid the storm
Bringing the lens back to operations, the quality of the two sued companies is the underlying color of this storm. Amid worries that consumer electronics have peaked, LUXSHARE ICT has treated automotive electronics and data centers as directions for a breakthrough. Financial reports show that in the first half of 2026, the company achieved revenue of 174.504 billion yuan, up 40.16% year on year, net profit attributable to shareholders of 7.843 billion yuan, up 18.04% year on year, and a gross margin of 11.78%. By business, consumer electronics remained the foundation, with revenue of 122.476 billion yuan, up 19.27% year on year; communications and data center business revenue was 16.609 billion yuan, up 49.66% year on year, with a gross margin of 17.29%, the fastest-growing segment; automotive electronics revenue was 32.391 billion yuan, up 274.10% year on year. Image source: Canned Image Library.
The VPD at issue this time is precisely a more cutting-edge part of the power management direction within the communications and data center business. In its interim report, Luxshare clearly stated that it is seizing industrial opportunities brought by the trend of AIDC power architecture evolving from 12V to 48/50/54V rack-level solutions and 800V high-voltage direct current. What it has already mass-produced and shipped is DC-DC low-voltage server module power supplies, while VPD is still in the customer verification stage and not in mass production. In other words, the business at issue is far from contributing profit, yet it has been the first to bear the fire of the patent war.
The biggest highlight of Foxconn Industrial Internet Co.,Ltd. is AI servers. Financial reports show that in the first half of 2026, the company achieved revenue of 557.861 billion yuan, up 54.63% year on year, net profit attributable to shareholders of 23.74 billion yuan, up 95.99% year on year, non-GAAP net profit of 22.984 billion yuan, up 96.99% year on year, and a gross margin of 7.15%, with quarterly net profit exceeding 10 billion yuan for four consecutive quarters. Cloud computing segment revenue rose 75.7% year on year, cloud service provider AI server revenue rose 2.3 times year on year, GPU AI rack shipments rose 3.2 times year on year, and ASIC AI rack shipments rose 3 times year on year, placing it in a leading global position in AI servers. But the low gross margin of the contract manufacturing model and the high concentration of customers also make Foxconn Industrial Internet Co.,Ltd. the first to be hit if AI capital expenditure slows. Regarding this investigation, the interim report of Foxconn Industrial Internet Co.,Ltd. touched on power management only in one place, saying it already covers key links such as complete rack design, liquid cooling and power management and can provide customers with integrated computing solutions, while the products at issue are likewise still in the internal verification stage. In other words, this patent wall currently blocks more of the two giants' future incremental path to high-power supply than the existing business that supports current results.
It is worth noting that Vicor filed the complaint simultaneously against multiple companies in China, the United States and Europe, which itself shows that vertical power delivery has become a world-class battlefield. Patent clashes will only become denser as AI computing expands, and today's two leaders are merely the ships first meeting the waves in this sea. When computing power becomes the new "oil," whoever holds the power supply patent closest to the chip holds the bargaining power of the next decade.
Looking back at history, Section 337 has not always ended badly. In 2019, the ITC launched a Section 337 investigation into Chinese photovoltaic cells at the request of Hanwha, and in June 2020 it issued a final determination finding that the products at issue from LONGi Green Energy, JinkoSolar and others did not infringe, terminating the investigation. For the two giants, filing is only the starting point; after that come a long series of proceedings including discovery, initial determination, review, final determination and presidential review, often measured in years. Whether LUXSHARE ICT and Foxconn Industrial Internet Co.,Ltd. can steer through this Section 337 storm depends on the patent chips in their hands and on the room to maneuver their global capacity.
The Section 337 investigation is not the first, and it will not be the last. The real talisman has never been avoidance, but the core technology patent pool held in one's own hands. What do you think about Foxconn Industrial Internet Co.,Ltd. and LUXSHARE ICT being drawn into the Section 337 investigation? Welcome to discuss in the comments section.
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