As Jiwei reported, AMD, although trailing NVIDIA in AI, has recently clinched significant deals, earning the trust of two major clients, Oracle and IBM. Oracle plans to integrate AMD’s Instinct MI300X AI chips into their cloud services, complemented by HPC GPUs. Additionally, as per insights from Ming-Chi Kuo, TF International Securities analyst, IBM is set to leverage AMD’s Xilinx FPGA solutions to handle artificial intelligence workloads.

Oracle’s extensive cloud computing infrastructure faces challenges due to a shortage of NVIDIA GPUs. Nonetheless, Oracle maintains an optimistic outlook. They aim to expand the deployment of the H100 chip by 2024 while considering AMD’s Instinct MI300X as a viable alternative. Oracle has decided to postpone the application of their in-house chips, a project with a multi-year timeline. Instead, they are shifting their focus to AMD’s high-performance AI chip, the MI300X, well-regarded for its impressive capabilities.

Reports indicate that Oracle intends to introduce these processor chips into their infrastructure in early 2024.

Similarly, IBM is exploring chip options beyond NVIDIA. Their new AI inference platform relies on NeuReality’s NR1 chip, manufactured on TSMC’s 7nm process. AMD plays a pivotal role in NeuReality’s AI solution by providing the essential FPGA chips. Foxconn is gearing up for AI server production using this technology in the Q4 2023.

Guo also pointed out that, although Nvidia remains the dominant AI chip manufacturer in 2024, AMD strengthens partnerships with platform service providers/CSPs like Microsoft and Amazon while acquiring companies like Nod.ai. This positions AMD to potentially narrow the AI gap with Nvidia starting in 2025. This collaboration also affirms that AMD remains unaffected by the updated U.S. ban on shipping AI chips to China.

(Image: AMD)

Major optical manufacturer, Largan Precision, held its online Q3 earnings conference on October 12, 2023. During the session, Chairman Lin En-ping’s responses to inquiries from analysts conveyed that the previously sluggish smartphone market might finally witness an upturn in Q4, as the iPhone 15 Pro Max’s robust pre-order performance surpassed market expectations. This bodes well for downstream customers’ willingness to procure lenses, and high-end lens demand is expected to rise.

TrendForce’s Insight:

1. Positive Signals Emerge from Largan Precision’s Statement

Since the beginning of 2023, the global smartphone market has been experiencing a general slump, influenced by factors such as China’s post-pandemic economic recovery falling short of expectations, rampant inflation, and uncertainty about economic prospects. Looking back at the previous Q1 and Q2 earnings conferences held by Largan Precision, Chairman Lin En-ping consistently displayed a relatively pessimistic outlook when addressing questions from financial analysts. This pessimism can be attributed to the subdued end-user demand, resulting in a natural decline in procurement momentum among downstream customers, which has made it challenging for Largan Precision to foresee clear future order demand.

However, with the arrival of Q4, the traditional peak season for smartphones, Chairman Lin En-ping provided a more positive response during the latest conference. This shift in stance can be attributed to the better-than-expected pre-order status of the high-end iPhone 15 Pro Max and the subsequent improvement in procurement momentum among downstream customers. Furthermore, there has been a resurgence in overall demand for high-end lenses. It is anticipated that the end demand for smartphones may improve in the upcoming Q4.

2. Increased Willingness for Lens Upgrades

As reported by Nikkei Asia on October 23rd, three inside sources have indicated that Vanguard International Semiconductor(VIS), a prominent semiconductor foundry, is gearing up to construct its first 12-inch wafer plant in Singapore, aiming to meet the surging demand for automotive chips.

It’s important to note that TSMC, the parent company of VIS, holds a significant 28.3% stake in the company. When approached for comments, VIS stated they remain open to various possibilities but are currently observing a quiet period preceding an earnings call, which restricts them to provide further details.

VIS’s Growth and Singapore Expansion

In 2019, VIS acquired a Singaporean 200mm wafer facility from GlobalFoundries for $236 million. Since then, they diversified into producing various sensors and gained a reputation in display driver ICs and power management chips. VIS operated only 200mm wafer plants in Taiwan and Singapore. Recent reports suggest their investment in a 12-inch wafer plant in Singapore is nearing approval, per Nikkei.

The new VIS plant in Tampines, Singapore, is strategically located, a 10-minute drive from their existing 200mm facility and near NXP and SSMC, TSMC’s joint venture. UMC is investing $5 billion in a nearby plant. Expansions by GlobalFoundries and Applied Materials in Singapore bolster the city-state’s semiconductor industry.

Chairman Leuh Fang cited increased demand from U.S., European, and Asian customers who aim to mitigate geopolitical risks tied to chips manufactured in China. His prior role as Deputy General Manager of SSMC in Singapore underscores the importance of this move.

Global Giants Expand Abroad to Meet Clients’ Demand

In line with its global expansion strategy, VIS is not the only player. TSMC is processing its global factory construction as well. Of particular note, the new facility in Arizona, US. The German plant is on schedule for production in 2027. In Japan, the Kumamoto plant is advancing rapidly, and production is anticipated to commence by the end of 2024. Besides, PSMC is planning to establish a 12-inch wafer plant in Japan, becomes the second Taiwanese semiconductor giant to set up shop in Japan after this move, expanding its global presence.

(Image: VIS)

Read more:

• [News] TSMC’s Global Expansion: Progress in New US, German, and Japanese Fabs
• [Insights] Quanta, Wiwynn, and Major Manufacturers Scale Up to Meet Rising Demand for AI Servers
• [News] PSMC’s Japanese Venture in Mie Prefecture Awaits Local Support

Volkswagen recently unveiled its extensively redesigned Tiguan lineup. This vehicle, built on the MQB Evo platform, offers a range of powertrain options, including gasoline, diesel, mild-hybrid, and plug-in hybrid (PHEV) variants. Notably, the PHEV model features a 1.5-liter TSI evo 2 turbocharged engine and a 19.7 kWh battery pack, providing an impressive electric-only driving range of 100 km with an efficiency of around 5.1 km/kWh.

TrendForce’s Insights:

1. Addressing Range Anxiety: PHEVs Gain Traction Among Consumers and Automakers

PHEVs offer a dual-power output system, primarily relying on traditional combustion engines for long-distance driving and electric power from the battery pack for shorter trips. These PHEVs feature larger battery packs than hybrid electric vehicles (HEVs) and can be recharged. Recently, PHEVs, including Volkswagen’s Tiguan, have surpassed a 100 km electric range milestone. Other models, such as the BMW 5 Series, Honda Accord e:PHEV, and Changan Oshan Z6, have also achieved similar electric ranges. Toyota even announced its focus on PHEV development, with a goal of reaching an average electric range of up to 200 km.

As calculated by TrendForce, the PHEV market share has grown from 9% in 2015 to 21% in 2023, with an average battery pack capacity increase from 15 kWh in 2018 to 20 kWh in 2023. While BEVs remain the primary choice in the electric vehicle market, manufacturers continue to introduce PHEV models due to consumer range anxiety and the desire to maximize the remaining value of traditional combustion engines.

2. Overcoming PHEV Challenges: Charging Infrastructure and Range Improvements

Most PHEVs are adapted from existing internal combustion engine (ICE) platforms, incorporating both ICE and electric power components. The complexity and higher number of components in PHEVs may impact overall vehicle efficiency, requiring additional maintenance or part replacement, which could be costly for consumers.

Consumers are well aware of the drawbacks of PHEVs, yet the steadily growing market share indicates that range anxiety remains a major concern. PHEVs, offering the comfort of a gasoline engine alongside electric capabilities, outweigh their inherent flaws when it comes to reducing range anxiety. Besides, Geely’s Zeekr hybrid series can incorporate a smart driving system with a centralized domain controller architecture, challenging the notion that traditional gasoline vehicle platforms can’t support advanced autonomous driving.

In conclusion, with the push from both the market and automakers, PHEV technology is continually advancing and is no longer considered a “transitional solution” as it was in the past. While inherent flaws still exist, consumers are more accepting of these drawbacks compared to their concerns about range anxiety. To completely eradicate range anxiety, the ratio of public charging stations to vehicles needs to shift from the current 7:1 to 2:1 or even 1:1. Alternatively, matching the range of internal combustion engine vehicles is crucial. However, both of these goals are not likely to be achieved until around 2030. Until then, PHEVs will maintain a significant presence in the market.

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.

2. 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.