Gelsinger's Taiwan visit a necessary step to secure Intel's ties with partners

Colley Hwang, DIGITIMES Asia, Taipei 0


Taiwan is the number-one producer of servers, and the servers produced by Taiwanese companies are used in data centers worldwide, with a 92%global market share. And despite the economic downturn, the server market can still expect mild growth.

DIGITIMES analyst Frank Kung pointed out that North American cloud service companies including Meta, Amazon AWS, Microsoft, and Google still provide the biggest business opportunities for servers, while US brands such as Hewlett-Packard (HP) and Dell have extended their presence from traditional PCs to servers.

Chinese vendors Inspur, Lenovo and Huawei form a significant camp mostly eyeing their domestic market. But the economic downturn in China has suppressed the server businesses of these vendors. In contrast to the double-digit growths they had seen in the past, Lenovo is expected to post a a decline of 8.5% in 2022, and Huawei a negative growth of 24.4%. It is an understandable trend where vendors are shifting their focus to the US and Europe.

But whatever brands we're talking about, their suppliers mostly come from Taiwan. For Intel, its only concern is whose CPUs the server makers use. This market segment has been dominated by Intel, with AMD data center processors having a mere 10% market share in 2020. But AMD's share is forecast to reach 19% by 2024, with Intel's reduced from 86.6% to 70%, and the rest being Arm architecture.

According to DIGITIMES findings, Taiwan manufacturers produced 17.008 million servers in 2021, and their output is estimated at 18.004 million in 2022, and 18.82 million in 2023.

Overall, demand from the Chinese vendors is softening, and the problems arising from the out-of-sync short and long supply chains are slowly easing. The momentum coming from new CPUs will drive demand for memory and other components. The US-China trade war and public cloud opportunities will also boost mainstream players' market shares.

Intel has been underperforming, with its own fabs taking the blame. In the past, Intel was always confident of its own technology, but its over-demanding specifications created stumbling blocks to yield rates during the manufacturing process, which subsequently allowed AMD and Nvidia - both of which had TSMC make their chips - to catch up, and in turn enriched the competitiveness of the Taiwanese foundry rival.

During the first-tool-in ceremony at TSMC's new US fab earlier this month, Nvidia's Jensen Huang and AMD's Lisa Su were both present. At the time, Intel's Pat Gelsinger was in Taiwan looking to tighten partnerships with suppliers. What a contrast!

Now by outsourcing some chip production to TSMC, Intel can better manage its product launch schedules. Apart from meeting with Acer, Asus and other brand vendors during his stay in Taiwan, it was also important for Gelsinger to enhance ties with manufacturers such as Wiwynn and Quanta.

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.