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.

Chinese media reported on the 22nd that China’s regulatory authorities are conducting investigations into Foxconn’s factories in Guangdong, Jiangsu, Henan, and Hubei. This comes at a time when Apple’s iPhone 15 series is in full production and seeing high shipment volumes. The investigation may potentially impact the production capacity of the iPhone 15. Market rumors suggest that Apple is considering gradually shifting orders to competitors, which could benefit companies like Luxshare Precision and Pegatron.

According to Taiwan’s Commercial Times, in response to the recent tax inspection, Foxconn emphasized on the 22nd that it would actively cooperate with relevant agencies in their operations. Major suppliers for iPhone 15 lenses, Largan Precision and Genius Electronic Optical, declined to comment on the situation with individual clients but emphasized that their current shipments are not affected.

Influenced by strong competition from Chinese smartphones, including Huawei, and concerns about overheating issues, the appeal of the iPhone 15 has waned, and the highly anticipated iPhone 15 Pro Max’s popularity has declined. In the Asian market, waiting times for the sought-after titanium alloy casing iPhone have been substantially reduced. Shipping times have decreased to approximately two weeks, while in-store pickup can be as fast as three days. Signs of cooling demand are also appearing in Europe and the United States.

Tech industry insiders note that even though demand for the iPhone 15 has decreased, Apple is still considering expanding its supply chain to be prepared for unforeseen circumstances.

In addition, samples of iPhone 16 components and designs are in the sampling stage, with plans to finalize them by January of next year. The recent tax inspection controversy involving Foxconn, combined with the fact that its competitor, Luxshare, has obtained the assembly NPI (New Product Introduction) for the 2024 iPhone 16 Pro Max, further strengthens Luxshare’s presence in the iPhone business. Its share of manufacturing is expected to increase significantly next year.

Furthermore, Luxshare has already become the primary assembly factory for Apple Watch and AirPods, and in 2020, it acquired two iPhone production lines from Wistron. Luxshare is also a major producer for Vision Pro, representing Apple’s accelerated localization efforts and a move away from its dependency on Foxconn.

Read more

• [News] China’s Tax Authorities and Natural Resource Departments Conduct Inspections on Key Foxconn Enterprises
• [News] Luxshare Doubles Business with 3 iPhone 15 Orders, Breaking Foxconn’s High-End Supply Dominance
• [News] Chinese Firms Rise in iPhone Supply Chain, Enter New Optical Component Line

(Photo credit: Apple)

China’s media, Global Times, reported yesterday that China’s tax authorities recently conducted tax inspections on key enterprises of Foxconn in Guangdong and Jiangsu. Meanwhile, the natural resources department conducted on-site investigations into the land usage of Foxconn’s key enterprises in Henan and Hubei.

The Chinese authorities’ actions in auditing taxes and land usage for Foxconn have raised significant concerns in Taiwan’s business community and the tech industry.

Foxconn Group released an official statement yesterday, emphasizing their commitment to legal and compliant practices as fundamental principles in all of their global operations. They also stated their active cooperation with relevant agencies’ operations. Taiwan’s Ministry of Economic Affairs has already been in contact with Foxconn and has offered assistance as necessary.

The Chinese authorities released information regarding their investigation into multiple Foxconn enterprises across China through state media but did not specify the reasons behind these tax and land usage inspections. The investigation results have also not been made public.

(Photo credit: Foxconn’s Stream)

Infineon, Hyundai, and Kia announced on October 18 that they have signed a multi-year agreement for the supply of SiC (Silicon Carbide) and Si (Silicon) power semiconductor modules and chips.

Under this agreement, Infineon will supply SiC and Si power components to Hyundai and Kia until 2030, and in return, Hyundai and Kia will support Infineon’s production capacity and reserves.

The demand for SiC power devices has surged with the growing popularity of new energy vehicles, and as a prominent industry leader, Infineon has embarked on numerous collaborations this year.

• Infineon and Resonac

In January, Infineon declared a new multi-year supply and cooperation agreement with Resonac Co., Ltd. (formerly Showa Denko K.K.). According to this agreement, Resonac will provide Infineon with SiC materials for producing SiC semiconductor components, including 6-inch and 8-inch wafers. Initially focused on 6-inch wafers, Resonac will later supply 8-inch SiC wafers to support Infineon’s transition to 8-inch wafers. As part of the agreement, Infineon will also provide Resonac with SiC material technology-related intellectual property.

• Infineon and TanKeBlue, SICC

In May, Infineon signed long-term agreements with TanKeBlue and SICC to ensure a more competitive and substantial supply of silicon carbide materials. These two suppliers will primarily provide Infineon with 6-inch silicon carbide substrates and offer 8-inch silicon carbide materials, aiding Infineon in transitioning to 8-inch SiC wafers. The agreements also encompass silicon carbide ingots, as Infineon had previously invested nearly 1 billion RMB in acquiring a laser-based wafer technology enterprise, aiming to enhance the utilization of silicon carbide substrates and device cost competitiveness.

Notably, both TanKeBlue and SICC will account for a double-digit percentage of Infineon’s long-term demand volume.

• Infineon and Foxconn

In the same month, according to the Foxconn’s official website, Infineon and Foxconn have signed a memorandum of cooperation to establish a long-term partnership in the field of electric vehicles. Under this agreement, the two companies will focus on the adoption of silicon carbide technology in high-power applications for electric vehicles, such as traction inverters, on-board chargers, and DC converters. They also plan to jointly establish a system application center in Taiwan to expand their collaboration further.

• Infineon and Schweizer Electronic

Additionally, Infineon is collaborating with Schweizer Electronic to develop an innovative solution aimed at directly embedding Infineon’s 1200V CoolSiC™ chips into PCB boards. This move seeks to significantly enhance the driving range of electric vehicles while reducing the overall system cost.

• Infineon and Infypower

In September, Infineon announced a partnership with Shenzhen Infypower (INFY) to provide the industry-leading 1200V CoolSiC™ MOSFET power semiconductor devices, boosting the efficiency of electric vehicle charging stations.

In line with their goal of capturing a 30% share of the global SiC market by 2030, Infineon revealed plans to invest up to 5 billion euros over the next five years to construct the world’s largest 8-inch SiC power semiconductor facility in Malaysia.

(Photo credit: Infineon)

Foxconn, during its 2023 Foxconn Tech Day, has introduced the MODEL N electric logistics vehicle and the mass-production version of the MODEL B crossover SUV. These offerings cater to different segments of the electric vehicle market, showcasing Foxconn’s versatile electric vehicle solutions. Additionally, they presented several models in the MODEL C lineup.

Foxconn’s Chairman, Young Liu, highlighted the company’s strategic transformation, stating, “Foxconn is turning from a manufacturing service company into a platform solution company. Foxconn’s CDMS (Commissioned Design and Manufacturing Service) service model is total solutions and bespoke solutions in the automotive space.”

MODEL C has successfully passed multiple testing and validation phases. Foxconn announced plans for performance and extended-range versions of MODEL C in the near future, with more robust powertrains, faster 0-100 km/h acceleration, and longer endurance. These options offer brand customers a range of choices. The vehicle is already in use by brand customers in Taiwan, with official sales now underway. Foxconn is set to begin mass production and deliveries starting in November, allowing consumers to hit the road in the first quarter of the coming year.

Liu also disclosed that LUXGEN n7 pre-orders have exceeded 5,000 units. Through CDMS, LUXGEN can focus on marketing and service, while Foxconn concentrates on design and manufacturing. This division of labor allows for faster time-to-cost and time-to-market, a strategy expected to yield more success stories in the future.

Liu emphasized that as with PCs and smartphones, automotive manufacturing is also shifting toward an outsourcing model. As competition intensifies, Foxconn’s role becomes more prominent, and the demand for specialized manufacturing services increases. Foxconn completes 80% of the operations, while customers handle the remaining 20%, thereby creating added value.

When asked about the growing proportion of OEM development in mainland China, Liu explained that CDMS has not yet been opened in China. However, with the increasing competitiveness of the Chinese electric vehicle market, cost-saving trends will likely emerge. When the time is right, Foxconn will establish electric vehicle manufacturing capabilities in China.

Regarding the three electric systems, electric motors, electronic control, and batteries, Liu stated that these systems will undergo local production in regions of relevance, with major research and development efforts carried out in Taiwan. A portion of production will remain in Taiwan, while another portion will be localized. The proportion of these three systems will depend on the electric vehicle production volume in other countries and collaborations with local brand companies. In Taiwan, the plan is to achieve an annual production scale of 50,000 to 100,000 electric vehicles, with the goal of securing a 10% market share.

Explore more 

• [News] Foxconn Aims to Create AI Factory for Smart Cities and EVs with NVIDIA
• [News] Foxconn’s Tech Day Showcases New Electric Vehicle Model and Vertical Integration Capabilities
• [News] Foxconn Chairman Discusses Competitive Strategy in EV Industry

(Photo credit: Foxconn’s Stream)