Server ODMs remain upbeat about shipments for the rest of this year despite the ongoing shortage of certain chips and components and expect to post high-single-digit or even double-digit shipment growth in 2022, according to industry sources.
Server ODMs are actively opening job vacancies and continuing to prepare IC materials still in short supply, such as power management ICs (PMIC). Sources pointed out that server visibility is high with good future growth momentum expected.
The consumer electronics industry, including notebooks and smartphones, is feeling the pressure of inflation and slowing economic growth, which may result in a slow second half of the year. It is also raising concerns on whether or not servers will be in the next wave of impacted industries. Recent reports that Amazon Web Services (AWS) is extending the service life of its data center servers and cloud service providers are reducing new hires have deepened market concerns.
From an order standpoint, customer demand is still booming. In the past, sources pointed out that server end applications were mainly PCs, but applications today are abundant. In the long run, AI applications including smart cities, smart medicine, and smart transportation will all require data center server computing.
In the short term, server ODMs are optimistic about the second half of the year. Even with the severe materials shortage, shipments in the second half are expected to surpass those of the first half. Annual growth in 2022 could reach double-digits.
Maurice Wu, president of Inventec, the world's largest server motherboard manufacturer, said the company has a three-month backlog of orders as a result of the COVID-induced closed-loop production at its Shanghai plant. The company is actively putting in overtime to catch up, estimating the shipment ratio between the first and second half of 2022 will reach 45:55, for a 22% shipment growth in the second half over the first.
According to CC Leung, vice chairman and president of Quanta Computer, the world's largest white-box server ODM, server demand remains strong due to the continuous expansion of AI applications. Quanta expects its server business in the second half to surpass that of the first half and will reach double-digit growth for the whole year.
ODMs remain concerned about the materials shortage, which is indicative of solid customer order demand. Both Wiwynn and MiTAC have expressed that getting their hands on materials is a top priority. According to supply chain companies, in addition to the shortage of PMICs, the lockdowns in China also caused a shortage of connectors, mechanical components, and wires, including flexible flat cables (FFC).
Additionally, it has been reported that the server supply for Intel's Purely CPU platform has dropped sharply and is even difficult to find in the spot market, indicating that shortages in the second quarter have been even more severe.
In response to materials shortages, manufacturers continue to expand inventory stockpiles. In the first quarter of 2022, Wiwynn's inventory level reached NT$50.93 billion (US$1.76 billion), up from NT$45.3 billion in the previous quarter and NT$27.9 billion from first-quarter 2021. Wiwynn said with strong customer order demand and high industry visibility, server makers must adopt a more active stocking strategy. Even with inventory levels on the high side, the risks do not warrant ending stockpiling.
ODMs in both Taiwan and China are expanding staffing structures in response to strong R&D demand, demonstrating their confidence in future industry development and changes in supply and demand.
Furthermore, server design in the past was mainly based on Intel processor platforms, but in recent years, AMD and Arm have also emerged. The number of R&D projects for AMD has grown especially fast with ODMs, which requires a good deal of R&D resources. GPU applications have also quickly increased due to AI demand. All of which is different from previous models focused on the Intel platform.
Article translated by Eifeh Strom
