Dell, a major server brand, placed a substantial order for AI servers just before NVIDIA’s Q2 financial report. This move is reshaping Taiwan’s supply chain dynamics, favoring companies like Wistron and Lite-On.

Dell is aggressively entering the AI server market, ordering NVIDIA’s top-tier H100 chips and components. The order’s value this year is estimated in hundreds of billions of Taiwanese dollars, projected to double in the next year. Wistron and Lite-On are poised to benefit, securing vital assembly and power supply orders. EMC and Chenbro are also joining the supply chain.

Dell’s AI server order, which includes assembly (including complete machines, motherboards, GPU boards, etc.) and power supply components, stands out with its staggering value. The competition was most intense in the assembly sector, ultimately won by Wistron. In the power supply domain, industry leaders like Delta, Lite-On, secured a notable share, with Lite-On emerging as a winner, sparking significant industry discussions.

According to Dell’s supply chain data, AI server inventory will reach 20,000 units this year and increase next year. The inventory primarily features the highest-end H100 chips from NVIDIA, with a few units integrating the A100 chips. With each H100 unit priced at $300,000 and A100 units exceeding $100,000, even with a seemingly modest 20,000 units, the total value remains in the billions of New Taiwan Dollars.

Wistron is a standout winner in Dell’s AI server assembly order, including complete machines, motherboards, and GPU boards. Wistron has existing H100 server orders and will supply new B100 baseboard orders. Their AI server baseboard plant in Hsinchu, Taiwan will expand by Q3 this year. Wistron anticipates year-round growth in the AI server business.

Following Saudi Arabia’s $13 billion investment, the UK government is dedicating £100 million (about $130 million) to acquire thousands of NVIDIA AI chips, aiming to establish a strong global AI foothold. Potential beneficiaries include Wistron, GIGABYTE, Asia Vital Components, and Supermicro.

Projections foresee a $150 billion AI application opportunity within 3-5 years, propelling the semiconductor market to $1 trillion by 2030. Taiwan covers the full industry value chain. Players like TSMC, Alchip, GUC, Auras, Asia Vital Components, SUNON, EMC, Unimicron, Delta, and Lite-On are poised to gain.

Reports suggest the UK is in advanced talks with NVIDIA for up to 5,000 GPU chips, but models remain undisclosed. The UK government recently engaged with chip giants NVIDIA, Supermicro, Intel, and others through the UK Research and Innovation (UKRI) to swiftly acquire necessary resources for Prime Minister Sunak’s AI development initiative. Critics question the adequacy of the £100 million investment in NVIDIA chips, urging Chancellor Jeremy Hunt to allocate more funds to support the AI project.

NVIDIA’s high-performance GPU chips have gained widespread use in AI fields. Notably, the AI chatbot ChatGPT relies heavily on NVIDIA chips to meet substantial computational demands. The latest iteration of AI language model, GPT-4, requires a whopping 25,000 NVIDIA chips for training. Consequently, experts contend that the quantity of chips procured by the UK government is notably insufficient.

Of the UK’s £1 billion investment in supercomputing and AI, £900 million is for traditional supercomputers, leaving £50 million for AI chip procurement. The budget recently increased from £70 million to £100 million due to global chip demand.

Saudi Arabia and the UAE also ordered thousands of NVIDIA AI chips, and Saudi Arabia’s order includes at least 3,000 of the latest H100 chips. Prime Minister Sunak’s AI initiative begins next summer, aiming for a UK AI chatbot like ChatGPT and AI tools for healthcare and public services.

As emerging AI applications proliferate, countries are actively competing in the race to bolster AI data centers, turning the acquisition of AI-related chips into an alternative arms race. Compal said, “An anticipate significant growth in the AI server sector in 2024, primarily within hyperscale data centers, with a focus on European expansion in the first half of the year and a shift toward the US market in the latter half.”

In just a short span of six months, AI has evolved from generating text, images, music, and code to automating tasks and producing agents, showcasing astonishing capabilities. TrendForce has issued a new report titled “Surge in AIGC Applications to Drive Long-Term Demand for AI Servers.” Beyond highlighting the latest developments in AI, the report also delves into strategies adopted by governments and industries to ensure the positive trajectory of AI’s development. It analyzes the projected timeline for the widespread implementation of AIGC applications and their impact on the demand for AI servers.

• AIGC Application Wave Expected to Arrive by 2025 Once Rules are Set

While the AIGC application frenzy in the first half of 2023 has raised concerns, it has also prompted governments and industries to actively address potential risks and issues stemming from AIGC applications, along with devising corresponding solutions. Currently, both the government and industries have strategies in place to regulate AIGC applications in terms of legal oversight, privacy protection, identity establishment, reliability enhancement, security augmentation, and copyright maintenance.

Considering the time required for governments to draft legislation and industries to enhance AI’s reliability, security, and copyright protection, it is estimated that the rules of the AIGC application will gradually solidify by late 2024 to early 2025, paving the way for the AIGC application surge around 2025.

Beyond the five major categories of AIGC applications—text generation, image generation, music generation, video generation, and code generation—AIGC technology-based applications like AI customer service, personalized AI assistants, AI search, and AI productivity tools are also gaining prominence. In the realm of gaming, whether in VR or open-world games, AIGC technology is set to significantly enhance immersion and freedom, ushering in revolutionary experiences.

• Long-Term Demand for AI Servers to Benefit Server Brands and ODMs

To secure a dominant position in the AI technology industry and embrace the upcoming AIGC application wave, application service providers, tech giants, national institutions, and startups are competing to bolster their AI computing resources. As core computing components experience increased shipments, the shipment volume of AI servers, which serve as foundational computing units, is also expected to surge.

In the proactive year of 2023, where institutions and enterprises are aggressively building computing resources, the AI server shipment volume is projected to grow substantially. Given the limited upstream semiconductor capacity, this momentum is likely to extend into 2024.

By 2025, propelled by the AIGC application frenzy, AI server shipments are poised for further stimulation. Consequently, due to institutions and businesses preemptively establishing computing resources and the projected timeline for large-scale AIGC application implementation, the AI server market is anticipated to witness a sustained demand surge. Given the intricate manufacturing of AI servers and their higher degree of customization, their profitability exceeds that of general servers. With the continual growth in AI server shipments, relevant server brands and ODM manufacturers are poised to reap significant benefits.

According to the news from Commercial Times, in a recent press conference, the four major American cloud service providers (CSPs) collectively expressed their intention to expand their investment in AI application services. Simultaneously, they are continuing to enhance their cloud infrastructure. Apple has also initiated its foray into AI development, and both Intel and AMD have emphasized the robust demand for AI servers. These developments are expected to provide a significant boost to the post-market prospects of Taiwan’s AI server supply chain.

Industry insiders have highlighted the ongoing growth of the AI spillover effect, benefiting various sectors ranging from GPU modules, substrates, cooling systems, power supplies, chassis, and rails, to PCB manufacturers.

The American CSP players, including Microsoft, Google, Meta, and Amazon, which recently released their financial reports, have demonstrated growth in their cloud computing and AI-related service segments in their latest quarterly performance reports. Microsoft, Google, and Amazon are particularly competitive in the cloud services arena, and all have expressed optimistic outlooks for future operations.

The direct beneficiaries among Taiwan’s cloud data center suppliers are those in Tier 1, who are poised to reap positive effects on their average selling prices (ASP) and gross margins, driven by the strong demand for AI servers from these CSP giants in the latter half of the year.

Among them, the ODM manufacturers with over six years of collaboration with NVIDIA in multi-GPU architecture AI high-performance computing/cloud computing, including Quanta, Wistron, Wistron, Inventec, Foxconn, and Gigabyte, are expected to see operational benefits further reflected in the latter half of the year. Foxconn and Inventec are the main suppliers of GPU modules and GPU substrates, respectively, and are likely to witness noticeable shipment growth starting in the third quarter.

Furthermore, AI servers not only incorporate multiple GPU modules but also exhibit improvements in aspects such as chassis height, weight, and thermal design power (TDP) compared to standard servers. As a result, cooling solution providers like Asia Vital Components, Auras Technology, and SUNON; power supply companies such as Delta Electronics and Lite-On Technology; chassis manufacturers Chenbro; rail industry players like King Slide, and PCB/CCL manufacturers such as EMC, GCE are also poised to benefit from the increasing demand for AI servers.

(Source: https://ctee.com.tw/news/tech/915830.html)

According to the news reports from money.udn, which indicate that Foxconn, the prominent tech manufacturer, has clinched a substantial contract to supply Apple with AI servers, marking a monumental stride into the Apple AI server market. Notably, these servers will be dispatched from Foxconn’s manufacturing facility in Vietnam, positioning it as a pivotal player in Taiwan’s burgeoning AI sector.

While Foxconn traditionally refrains from commenting on individual clients and order specifics, market insiders reveal that Foxconn is not only the foremost assembler of Apple iPhones but also a crucial supplier of data center servers. As Apple charges ahead in the realm of AI applications, necessitating heightened support from AI servers, Foxconn’s stronghold in the AI server market has positioned it as Apple’s preferred collaborator due to its longstanding partnership.

Insiders indicate that Apple’s directive has prompted Foxconn to exclusively ship AI servers to Apple via its subsidiary, Foxconn Industrial Internet (FII), stationed in Vietnam.

Market research firms report that Foxconn currently holds a substantial global server market share of approximately 43%. This prominence not only establishes Foxconn as a manufacturing leader but also as the primary supplier to Amazon, the global cloud services (CSP) frontrunner. Having already supplied AI servers for ChatGPT and NVIDIA, and with primary customer Google rapidly venturing into generative AI, along with Apple’s recent strategic foray, Foxconn is poised for a surge in server business orders.

Apple’s CEO, Tim Cook, recently confirmed Apple’s longstanding involvement in various AI technologies, including generative AI, while emphasizing the current surge of resources into AI development. With Apple’s R&D expenditure rising to $22.61 billion last quarter, experts speculate that a significant portion has been allocated to AI development.

Moreover, international sources report that Apple is discreetly crafting the “Ajax” large-scale language model, potentially heralding the arrival of the generative chatbot “SiriGPT” in the near future. With Apple’s vast user base across the globe, abundant data resources could pose a threat to rivals such as Google and Microsoft.

Industry pundits assert that Apple’s extensive global user feedback from devices like iPhones, iPads, and Macs, combined with the mature ecosystem of the App Store, endows it with a strategic advantage in AI application development. Swiftly advancing AI server and data center deployment could enable Apple to navigate the curve and surge ahead in this competitive race.

Foxconn’s Chairman previously expressed optimism in the growth potential of CSP and AI servers. With Foxconn’s server revenues reaching $1.1 trillion last year, the company’s status as a server manufacturing leader naturally aligns with this burgeoning demand. Industry estimates underscore the dramatic increase in Foxconn’s AI server-related orders, reaching several billion dollars. This positions Foxconn as the definitive victor in the current AI wave, solidifying its place at the forefront of global AI server leadership.

(Source: https://money.udn.com/money/story/5612/7351082)