According to a report by Taiwan’s Economic Daily, the latest GH200 module released by NVIDIA has seen its assembly orders exclusively undertaken by Foxconn, while the assembly orders for L40S are also entirely managed by Foxconn.

Foxconn has traditionally refrained from commenting on individual business and order dynamics. It is believed that AI chip modules constitute the highest-margin product within the entire server supply chain.

Foxconn has been a longstanding partner of NVIDIA, providing an end-to-end solution across chip modules, baseboards, motherboards, servers, and chassis. Foxconn’s capabilities have facilitated the creation of a comprehensive solution for NVIDIA’s AI server supply chain.

Previously, Foxconn had an exclusive assembly partnership with NVIDIA for the “H100” and “H800” modules, not only retaining the existing orders but also securing a substantial portion of the HGX module orders. Now, reports indicate that Foxconn will exclusively supply even NVIDIA’s newly unveiled GH 200, and the L40S.

Industry sources indicate that due to severe constraints on TSMC’s advanced CoWoS packaging capacity, the scaling up of NVIDIA’s AI chip production has been hindered. However, with new CoWoS production capacity set to gradually open up in the late third quarter to the fourth quarter, shipments of Foxconn’s AI chip modules are anticipated to rapidly increase.

Industry sources reveal that in business negotiations, NVIDIA is known for demanding from its suppliers, but it is also generous in its offerings. As long as suppliers provide products that meet or even exceed expectations, NVIDIA is willing to offer reasonable prices, fostering mutually beneficial relationships with its partners.

(Photo credit: NVIDIA)

US-based CSPs have been establishing SMT production lines in Southeast Asia since late 2022 to mitigate geopolitical risks and supply chain disruptions. TrendForce reports that Taiwan-based server ODMs, including Quanta, Foxconn, Wistron (including Wiwynn), and Inventec, have set up production bases in countries like Thailand, Vietnam, and Malaysia. It’s projected that by 2023, the production capacity from these regions will account for 23%, and by 2026, it will approach 50%.

TrendForce reveals that Quanta, due to its geographical ties, has established several production lines in its Thai facilities centered around Google and Celestica, aiming for optimal positioning to foster customer loyalty. Meanwhile, Foxconn has renovated its existing facilities in Hanoi, Vietnam, and uses its Wisconsin plant to accommodate customer needs. Both Wistron and Wiwynn are progressively establishing assembly plants and SMT production lines in Malaysia. Inventec’s current strategy mirrors that of Quanta, with plans to build SMT production lines in Thailand by 2024 and commence server production in late 2024.

CSPs aim to control the core supply chain, AI server supply chain trends toward decentralization

TrendForce suggests that changes in the supply chain aren’t just about circumventing geopolitical risks—equally vital is increased control over key high-cost components, including CPUs, GPUs, and other critical materials. With rising demand for next-generation AI and Large Language Models, supply chain stockpiling grows each quarter. Accompanied by a surge in demand in 1H23, CSPs will become especially cautious in their supply chain management.

Google, with its in-house developed TPU machines, possesses both the core R&D and supply chain leadership. Moreover, its production stronghold primarily revolves around its own manufacturing sites in Thailand. However, Google still relies on cooperative ODMs for human resource allocation and production scheduling, while managing other materials internally. To avoid disruptions in the supply chain, companies like Microsoft, Meta, and AWS are not only aiming for flexibility in supply chain management but are also integrating system integrators into ODM production. This approach allows for more dispersed and meticulous coordination and execution of projects.

Initially, Meta heavily relied on direct purchases of complete server systems, with Intel’s Habana system being one of the first to be integrated into Meta’s infrastructure. This made sense since the CPU for their web-type servers were often semi-custom versions from Intel. Based on system optimization levels, Meta found Habana to be the most direct and seamless solution. Notably, it was only last year that Meta began to delegate parts of its Metaverse project to ODMs. This year, as part of its push into generative AI, Meta has also started adopting NVIDIA’s solutions extensively.

According to a report by Taiwan’s Economic Daily, the share of Chinese companies in Apple’s laptop manufacturing has expanded. After Luxshare secured assembly contracts for AirPods and iPhones, Chinese ODM Wingtec has commenced mass production of the 13-inch MacBook Air at its Kunming facility in Yunnan province, gradually eroding the historical market share of Taiwanese manufacturers like Foxconn and Quanta.

Both Foxconn and Quanta have exhibited relatively conservative stances towards the laptop market this quarter. Apple’s suppliers has typically refrained from commenting on competitor dynamics and single customer order trends. Quanta believes that the laptop market’s recovery is sluggish, with laptop shipments anticipated to decrease by 20% in the coming year. Additionally, the shift of certain Chromebook orders to an early June shipment date, coupled with a high base effect, is expected to result in a decline in the company’s laptop shipments this quarter.

On the other hand, at Foxconn, Chairman Young Liu previously stated that the company aimed to secure a larger market share in the personal computer (PC) segment. However, the decelerating momentum in the laptop industry demand is expected to persist into the latter half of the year. As a result, the third-quarter performance of the computer division is projected to remain on par with the second quarter while experiencing a decline compared to the same period last year.

Presently, Quanta is the largest assembly factory for Apple laptops, followed by Foxconn. According to China’s quality certification center, Wingtec has obtained a 3C quality certificate for its mass production of MacBook Air equipped with Apple’s M2 chip at the Kunming facility.

In the past, Apple’s MacBook Air product line was manufactured by both Foxconn and Quanta. Wingtec is the sole Chinese factory among Apple’s laptop manufacturers. Wingtec, known for its expertise in smartphone manufacturing, announced in April of this year that it secured Samsung’s 2023 smartphone and tablet ODM orders. In recent years, Wingtec has expanded its business scope to include semiconductors through acquisitions of automotive electronics firm Nexperia, successfully entering Apple’s supply chain.

Industry sources indicate that Apple is committed to diversifying MacBook laptop production to include various locations across China. Over the years, Apple has aimed to expand MacBook laptop production to more countries and companies. Analysts speculate that Apple’s ultimate plan is to allocate 55% of MacBook manufacturing to Quanta, 35% to Foxconn, and 10% to Wingtec.

(Photo credit: Apple)

At an online investor meeting, Foxconn Group’s Chairman Young Liu shared insights on the company’s current endeavors. He disclosed that the group is in discussions with over 10 clients on 20 electric vehicle (EV) collaboration projects. Out of these, two projects are already in production, and five more are likely to result in contracts. Additionally, Foxconn’s electric vehicle platform, Model C, is on track for mass production in Taiwan in the fourth quarter. Analyzing the information released during the meeting, TrendForce offers the following insights:

• Foxconn’s Electric Vehicle Platform Outsourcing Model Builds a Self-Sufficient Ecosystem

Electrified vehicle platform manufacturing enables various components to be categorized into several platform types based on vehicle segments, avoiding the chaotic scenario of each car having unique specifications. This modular approach enhances the utilization of interior space and promotes advancements in battery life and future advanced driving control designs. Consequently, various automakers are introducing new energy vehicle platforms.

However, initial investments in platform development can be burdensome for automakers. Moreover, integrating new EV technologies into platforms poses potential risks. Foxconn’s EV platform, by adopting an ‘outsourced’ manufacturing concept, reduces initial resource expenditures for automakers and accelerates market entry for EV models.

Foxconn also presents the concept of MIH, a membership-based industry cluster, which gathers around 2,400 suppliers spanning battery, motor, and control systems, building a comprehensive EV platform ecosystem.

• Correct Market Approach Yet Missing a Vital Catalyst

Foxconn, not opting for a fully proprietary brand, draws lessons from Taiwan’s automotive brand history. Building on years of contract manufacturing, the company ventures into the EV market, positioning itself ahead of the curve.

However, with the rapid global development of electric vehicles, the early advantages Foxconn established face challenges. The Volkswagen MEB platform successfully produced the Ford Explorer, hinting at potential collaborations through platform sharing. Audi is reportedly considering direct acquisition of a Chinese new energy vehicle platform. The common theme here is that traditional automakers seem inclined to collaborate with proven counterparts, showcasing the cautious approach toward platforms. At this stage, while Foxconn’s promising achievements might attract certain startups, their stability and market scale might not fully align with Foxconn’s EV market expectations.

Foxconn is well-prepared but awaits a catalyst. The company currently lacks the support of established automakers like GM, BMW, and Stellantis. If the projects mentioned during the investor meeting involve collaborations with such established players and secure manufacturing contracts, Foxconn’s model will foster a more diversified evolution in future EV platform collaborations.

(Photo credit: Foxconn)

According to a report by Taiwan’s Commercial Times, China’s Haitong Securities has taken the lead in reducing shipment expectations before Apple’s upcoming new product launch next month. The company has lowered the shipment forecast from the initial 83 million units to 77 million units, marking a decrease of 6 million units.

Industry experts point out that lackluster demand in the end market and challenges in the manufacturing process are the main reasons behind the market’s growing skepticism towards iPhone 15 shipment numbers.

Haitong Securities indicates that Apple’s iPhone 15 shipment volume could be revised down to 77 million units. This is primarily due to lower-than-expected yield rates for the CMOS image sensors (CIS) provided by Sony for the periscope lenses. The production bottleneck for iPhone 15 and Plus models is Sony’s 3-layer CIS structure (PD/TX + pixel + ISP), leading to subpar production yields.

Industry experts also mention that the high difficulty in producing the titanium metal frame is attributed to the differing coefficients of thermal expansion between titanium and aluminum. However, this issue can be managed by increasing Foxconn’s production capacity.

The LIPO (Low Injection Pressure Overmolding) screen, on the other hand, faces low yield rates from LG and will need Samsung’s support. Nonetheless, the supply situation for these two components should reach a controlled stage.

Industry sources believe that delays in production for iPhone 15 stem from Sony’s lens sensors, the new titanium alloy frame, and the 1.55mm narrow border screen. However, the primary reason for Apple’s adjustment of iPhone 15’s sales target remains concerns over demand. Both the iPhone 15 Pro and iPhone 15 Pro Max are expected to come with higher price tags, potentially dampening consumer willingness to purchase. The decision to trim production plans prior to the new phone’s release warrants close attention to whether it garners consumer acceptance after hitting the market.