In parallel with AI and IoT, quantum technology stands as one of the three engines driving humanity’s Fourth Industrial Revolution. With the potential to reshape our daily lives, quantum technology and its applications have not only garnered worldwide attention but also become a focal point in the development strategies of advanced nations. Supported by the National Science and Technology Council (NSTC) of Taiwan, the Center for Quantum Frontiers of Research and Technology (QFort) at National Cheng-Kung University (NCKU) has chosen Amazon Braket from Amazon Web Services (AWS) as its primary computing platform. Amazon Braket is a unique quantum cloud service platform that can bolster QFort’s integrated research on quantum theory, materials, components, and computing equipment. …

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)

The new normal ushered in by the pandemic will not only become the driving force of digital transformation but will also continue to drive the server market in 2022, according to TrendForce’s investigations. It is worth noting that potential unmet demand in 2021 and the risk of future server component shortages will become medium and long-term variables that influence the market. Analyzing the shipment volume of completed servers, a growth rate of approximately 4-5% in completed server shipments is expected next year with primary shipment dynamics remaining concentrated in North American data centers with an annual growth rate of approximately 13-14%. From the supply chain perspective, the ODM Direct business model has gradually replaced the business model of the traditional server market, giving cloud service providers the ability to respond quickly to market changes. However, based on the unpredictability of the market, TrendForce assumes two forecasts for server growth trends. One, the supply situation of key components is effectively improved. Two, the supply situation of key components is exacerbated.

TrendForce states, based on the current situation as materials issues ease quarter by quarter, the annual growth rate of server shipments in 2022 will reach 4~5%. There are three primary factors driving market momentum. First, the introduction of the Intel Sapphire Rapids and AMD Genoa platforms into the market may once again stimulate the replacement of enterprise client servers and infrastructure construction in data centers. Second, the market generally believes that transformational needs generated by the pandemic in 2022, such as shifts in working paradigms and the new normal, will continue to drive the cloud market. Furthermore, international tensions have led to geopolitical uncertainty, which in turn has encouraged countries to tighten their control over data sovereignty and prompting the emergence of small-scale data centers in specific geographic locations.

Actual shipment volume of completed servers in 2022 depends on improvement of supply chain issues

Based on the two aforementioned assumptions, if the pandemic is effectively controlled next year, and international logistics, satisfaction of materials demand, and other factors either return to normal or fare better than expected, server companies will be able to increase their shipping capabilities and the annual growth rate of shipments in the overall server market will be able to reach 5-6% while the annual growth rate of ODM-Direct will approach 15%, up from the original forecast 13%. However, if the pandemic intensifies next year, the overall global economy will continue under that dark cloud which will greatly affect the willingness of companies to invest. In that case, the estimated annual growth rate of server shipments will fall to only 3-4%. In addition, the growth momentum of North American data centers will also be affected leading to an annual growth rate of ODM-Direct of only 10%, approximately.

As a whole and continuing under the influence of the two-year pandemic, the business trend of flexible deployment is irreversible. Regardless of overall economic changes, TrendForce expects double-digit growth in the demand for ODM-direct servers next year while overall server demand will also maintain a positive growth trajectory. However, continued attention should be focused on issues related to server order fulfillment in the broader market, including the fulfillment rate of key PMIC and LAN chip materials. At the same time, another major market variable will be whether Intel and AMD can introduce their two new platforms as scheduled next year and inject additional momentum into equipment replacement.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

In light of rapid advancements in 5G, AI, cloud computing, and cloud services, TrendForce has observed that, since 2012, the widespread adoption of smartphones has brought about the emergence of certain new applications such as smartphone apps that leverage backend server support. Furthermore, enterprise cloud migration has noticeably accelerated after digital transformation activities began taking place in 2016. As a result, widespread data center deployments took center stage as the industry mainstream prior to 2020.

Moving into 2021, however, one of the many impacts of 5G commercialization on the market has to do with the regional deployment of infrastructures (i.e., small-scale data centers). This trend towards local deployment can be primarily attributed to the increasing stringency of personal data protection laws by governments worldwide that emphasize both the residency and the sovereignty of consumer data. Major public cloud companies are now beginning to establish cloud deployments closer to regions that represent sources of data generation, in order to deliver faster data analysis that is still in accordance with the law.

TrendForce’s observations on the build-out of data centers can be divided into the individual and enterprise aspects. With regards to the former, as connected devices become increasingly widespread and emerging content services more popular in the post-pandemic stay-at-home economy, consumer spending on streaming videos and online shopping began to experience a rapid spike, thereby contributing to a gradual increase in server build-outs for cloud services. Enterprises, on the other hand, have been seeking and deploying more flexible infrastructures in response to pandemic-induced uncertainties. Hence, certainly subscription services and hybrid cloud services have also been gaining momentum in the ongoing trend of cloud migration.

It should be noted that, due to recent geopolitical tensions, which intimately dictate the development of various countries’ industries and supply chains, global enterprises also face rapidly changing market needs as well as a high degree of uncertainties stemming from the pandemic. In turn, enterprise demand for cloud services has also seen a continued rise in the past two years. With respect to the adoption of AI and other emerging technologies, most enterprises prefer cloud services due to such services’ flexible cost structures. TrendForce’s latest investigations indicate that flexible pricing strategies and diverse services offered by data centers have directly propelled the demand from enterprises for cloud applications in the past two years. From the perspective of the server supply chain, these shifts have facilitated a gradual shift of the predominant business model in the server market from traditional server brands to ODM Direct.

In addition, data center-related technologies have also progressed significantly. As the way people work and live transforms, accompanied by the emergence of e-commerce and streaming media, enterprises have also become increasingly well-versed in cloud services and increasingly able to leverage related technologies. As such, the primary sources of competition in the cloud market will include not only infrastructures responsible for computing, storage, and networking, but also emerging technologies such as edge computing and software/hardware integration of related services by major operators. In particular, as 5G services successively kick into gear worldwide, the concept of “cloud-edge-local network” will begin to replace the current “cloud only” framework on a massive scale, thereby extending the relevant commercial opportunities from cloud services to hardware vendors. That is to say, in the future, cloud services will no longer be limited to the software front, as in-house hardware brands from CSPs are set to become the next battlefield while these companies compete to offer comprehensive services.

All of this raises the question of whether the build-out of data centers will involve more challenges and opportunities going forward. TrendForce believes that, in addition to factors such as telecommuting and e-commerce, data center demand from biomedical applications (for instance, the ramp-up of vaccinations) will also experience substantial growth, with the caveat that regulations governing the protection and collection of medical data will be even more stringent than those driving various countries’ data sovereignty endeavors. Hence, privacy and security pertaining to medical data will likely become not only a global pursuit, but also a significant challenge facing the application of data centers.

（Image credit: Unsplash）

Escalating trade tensions between the US and China, rising geopolitical issues, increased tariffs, and uncertainties stemming from the COVID-19 pandemic’s emergence last year have compelled server ODMs to actively shift their operations closer to clients as well as engage in risk mitigation strategies, according to TrendForce’s latest investigations. Taiwanese ODMs, in particular, are shifting their production bases away from domestic China and accelerating the installation of additional overseas production lines. TrendForce expects the share of servers manufactured in domestic China by global server ODMs to undergo a 7% YoY decrease this year as these ODMs shift their production bases mainly to Taiwan. Furthermore, Taiwanese ODMs are expected to account for about 90% of total server production this year.

On the other hand, server assembly operations, which are closely related to motherboard manufacturing operations, are also dynamically reserving their L6 capacities. Server assembly facilities located in New Mexico and the Czech Republic are gradually installing new production lines for server motherboards there. Inventec, Wistron (including Wiwynn), and Foxconn all currently possess sufficient motherboard manufacturing capacities for allocation as needed.

While future changes in the overall server supply chain remains to be seen, it should be pointed out that the migration of production bases pertaining to US companies is of particular importance. For instance, North American CSPs have requested their server ODM partners to migrate L6 assembly lines to locations such as Taiwan and Southeast Asia in response to potential geopolitical factors going forward. However, servers to be shipped to non-US regions will still be manufactured in China in accordance with prior plans. Aside from Google and Facebook, both of which have production lines in Taiwan, AWS and Microsoft have also transitioned their production lines to Taiwan.

Regarding major server ODMs’ current progress, most of them have installed new production lines in Taiwan, with Inventec, Wistron, Quanta, and Foxconn making the most headway. For instance, after installing three additional production lines in Guishan, Taoyuan at the end of 2020, Inventec currently operate a total of eight production lines, while Wistron has not only installed several spare production lines in the Southern Taiwan Science Park, but also planned to expand production bases in Southeast Asia at the end of 2021 for capacity allocation purposes. Quanta is aiming to capitalize on demand from 5G-related applications and data center build-outs by continually adjusting its production capacity for motherboards in Taiwan and Thailand. Finally, by expanding the physical capacity of its Taoyuan facility, Foxconn is able to avoid incurring tariffs for its North American clients’ L6 assembly operations.