Artificial intelligence is emerging as both a challenge and an opportunity for Dixon Technologies, with the electronics manufacturing services (EMS) major saying that AI driven demand for memory chips has increased component costs in the near term while also opening up a significant opportunity in server manufacturing for data centres.
Speaking during the company’s Q4 FY26 earnings call, management said AI-led demand has tightened the supply of key semiconductor components, resulting in higher memory prices and cautious procurement by consumer electronics brands.
“Electronics industries continue to face inflationary pressure in key components such as memory chips and semiconductor linked inputs, driven by AI led demand and supply constraints resulting in cautious procurement behavior towards brands,” Atul Lall, Managing Director and Vice Chairman, Dixon Technologies said in the call.
The company said these factors, along with geopolitical tensions and softer consumer demand, weighed on its smartphone and IT hardware businesses during the March quarter.
Despite these short term challenges, Dixon believes AI will create a new avenue of growth through domestic manufacturing of servers and enterprise infrastructure.
Betting on AI server manufacturing
One of the biggest announcements during the earnings call was Dixon’s plan to enter the server manufacturing ecosystem. Lall said the company is in discussions with a joint venture partner to tap the rapidly expanding server market, which is being fuelled by AI workloads and data centre investments.
“We are also in discussion with a JV partner to participate in the fast growing server opportunity and to move from end client IT hardware into data center and enterprise infrastructure hardware,” he said.
He added that the opportunity is supported by favourable government policies encouraging localisation of server manufacturing.
According to the management, “strong government policy tailwinds on server manufacturing and backward integration, including a clear push on localization and a tax holiday framework… meaningfully improves the viability and return profile of India based server and component manufacturing.”
AI demand raises component costs
Management acknowledged that AI has created temporary cost pressures across the electronics industry. During the analyst interaction, Saurabh Gupta, Chief Financial Officer, Dixon Technologies explained that rising memory prices have lifted smartphone selling prices, which should support revenue growth even if margins appear optically lower because of the pass through nature of the business.
Lall also said Dixon expects smartphone revenues to benefit from both higher pricing and improved volumes as customer ordering patterns recover.
Data centre play beyond consumer electronics
Later in the call, when asked about the server business, Lall said discussions are at an early stage but the company is encouraged by the government’s focus on building a domestic server ecosystem.
“We feel that the government policy framework for local manufacturing of servers for serving the Indian Data Center requirement is going to get a significant flip. The contours are being worked out.”
While Dixon did not disclose revenue targets for the server business, management indicated that the segment could become an important extension of its IT hardware portfolio over the next few years.
The comments underscore how AI is reshaping the EMS industry. On one hand, soaring demand for AI infrastructure is increasing the cost of semiconductor components such as memory chips. On the other, it is creating fresh manufacturing opportunities in servers, data centre hardware and enterprise infrastructure—areas where Dixon is positioning itself for its next phase of growth.
