[Insights] Quanta, Wiwynn, and Major Manufacturers Scale Up to Meet Rising Demand for AI Servers

2023-10-24 Semiconductors editor

In October 2023, Quanta revealed plans to open three new factories in California, USA, with the goal of creating state-of-the-art assembly lines for AI servers. Around the same time, Wiwynn shared its intentions to launch a server cabinet assembly plant in Johor, Malaysia, featuring advanced liquid cooling technology. Additionally, server contract manufacturing giants, Foxconn and Inventec, are strategically positioning their AI server manufacturing facilities both domestically and internationally to meet the expected demand for AI server orders in the 2024 market.

 TrendForce’s Insights:

  1. Wiwynn and Quanta Open New AI Server Facilities, Enhancing Orders from Major U.S. Cloud Service Providers

Both Wiwynn and Quanta are contract manufacturers for cloud service giants such as Meta, Microsoft, and AWS. These three cloud service providers accounted for nearly 50% of the global server procurement in 2023. They’re doing this to keep up with the growing demand for AI servers, especially in the latter part of 2023, driven by applications like ChatGPT. Big cloud service providers, have allocated a significant chunk of their global server orders to these manufacturers, giving AI servers a top spot over regular servers.

Wiwynn, in particular, has set up shop in Malaysia to meet the surging demand for AI servers. Due to factors like the trade tensions between China and the U.S. and tariff avoidance measures, they are shifting their manufacturing capacity and equipment from their Guangdong factory in China to locations in Taiwan and Malaysia. This transition is expected to be completed between the end of 2023 and early 2024, making it easier to manage resources on a global scale.

Quanta’s smart move to open new assembly fabs near major U.S. cloud service providers allows them to deliver quickly to data centers in Europe and the U.S., saving on transportation costs and ensuring speedy deliveries. Both major Taiwanese manufacturers are optimistic about their orders for AI servers. This optimism allows them to expand their manufacturing capabilities in existing and new locations to strengthen partnerships with the big cloud players.

  1. Leading Taiwanese Server Manufacturers Expand Production at Home and Abroad, Anticipating a Multi-Fold Growth in AI Server Shipments by 2024

Major companies like Foxconn and Inventec are actively expanding their production facilities, both in their home country and abroad, to prepare for the expected increase in orders for AI servers from leading cloud service providers in 2024.

Fii and Ingrasys Inc., two important subsidiaries of Foxconn, dedicated to handling orders and manufacturing for servers. They have their own server assembly plants in various locations, including China, the United States, Europe, Vietnam, and Taiwan. They follow an integrated supply chain model, starting from producing motherboards to assembling complete server cabinets. Once the assembly is done, they ship the products to the data centers of cloud service providers. To meet the anticipated high-end AI server orders in 2024, Ingrasys Inc. added new production lines in the second quarter of 2023 to meet the demands of AI server manufacturers.

Inventec, a manufacturer that specializes in making server motherboards, expects a steady demand for AI servers in 2024-2025. With this expectation, they started construction at their factory in Thailand in Q3 of 2023. By Q4 of 2024, the factory will undergo production line testing, and mass production could begin as early as the first quarter of 2025 to meet the needs of major manufacturers. The new factory in Mexico is expected to match the production capacity of their Chinese facility. It has already started limited production and is expected to be in full operation by Q4 of 2024.

The four major contract manufacturers in Taiwan, specializing in server production, are either adding new production lines to their existing facilities or building new factories overseas between Q2 to Q4 of 2023. This undoubtedly shows their positive attitude to AI server shipments in 2024. As the use of AI servers continues to grow, market demand is expected to significantly increase year by year, which is likely to bring substantial revenue, profit, and production advantages to these contract manufacturers.