Server ODMs Add Taiwan Production Lines
July 3, 2019 | TrendForceEstimated reading time: 2 minutes
According to the latest investigations by DRAMeXchange, a division of TrendForce, although the US and China have reopened trade negotiations, US server-related imports from China still face a 25% tariff, thus server ODMs will still add production lines in Taiwan as scheduled to avoid risks. North American Internet Service Providers (ISPs) such as AWS and Microsoft have already begun requesting collaborating ODMs to move their L6 (Level 6) server production lines to Taiwan to avoid potential tariff costs, whereas production plans for products shipped to non-US regions will remain as is.
TrendForce Senior Analyst Mark Liu points out that, judging from the operations of major server ODMs, we see them all establishing new production lines on Taiwan soil, with Inventec, Wiwynn and Quanta being the most aggressive at it. Inventec, for example, has already added two new production lines in Guishan, Taoyuan by the end of 2018, whereas Wiwynn has already introduced a new production line for its plant at Southern Taiwan Science Park last year, thanks to the addition of two new customers, and is expected to set another production line into motion this second half-year in conformity with plans to ramp up production next year.
Quanta's goal is to add 3 new L6 server production lines in order to meet the future demands of 5G-related applications and datacenter growth, whereas MiTAC's goal is to expand the plot ratio of its Hsinchu plant so as to nullify the tariffs' effects on L6 products for customers.
TrendForce believes that production lines located in Taiwan won't be achieving a high line-coverage rate, mainly since issues in testing and yield can't be completely resolved in the short term. Therefore, Taiwan ODMs will still rely on China for motherboard manufacturing, but some production lines will be moved back to Taiwan in order to lessen the effects of tariffs on shipments bound for certain North American customers, who will bear some of the costs incurred in plant relocation. There are currently a few ODMs avoiding tariffs through transshipments: Quanta, for example, ships its L6 servers to Taiwan, then to America after converting them to L7 servers. Although there's an additional shipment cost, it will still be cheaper than relocating production lines.
In the long-term, even after adding tariff costs, it is still more economically beneficial to manufacture in China, thus the motherboards and L6 production lines will still be located primarily in China, while Taiwan's share of lines will gradually increase to between 20% and 30% and revolve around the production of products with high added-value (Such as turnkey solutions for IDC customers in North America).
About TrendForce
TrendForce is a global provider of the latest development, insight, and analysis of the technology industry. Having served businesses for over a decade, the company has built up a strong membership base of 435,000 subscribers. TrendForce has established a reputation as an organization that offers insightful and accurate analysis of the technology industry through five major research divisions: DRAMeXchange, WitsView, LEDinside, EnergyTrend and Topology. Founded in Taipei, Taiwan in 2000, TrendForce has extended its presence in China since 2004 with offices in Shenzhen and Beijing.
Suggested Items
Micron First to Ship Critical Memory for AI Data Centers
05/01/2024 | MicronMicron Technology, Inc. announced it is leading the industry by validating and shipping its high-capacity monolithic 32Gb DRAM die-based 128GB DDR5 RDIMM memory in speeds up to 5,600 MT/s on all leading server platforms.
HQ NextPCB of HQ Electronics Debut on the International Stage for Electronics Manufacture at IPC APEX 2024
05/01/2024 | PRNewswireHQ NextPCB of HQ Electronics, a leading Chinese-based multilayer PCB manufacturer and assembly house showcased its industrial prowess on the international stage for the first time at the IPC APEX Expo 2024.
GPV’s Q1 2024 Interim Financial Report Shows Strong Navigation in Uncertain Times
05/01/2024 | GPVDanish-based GPV recorded an expected drop in sales to DKK 2.3 billion for the first quarter of 2024. The decline also affected the operating profit, which was DKK 155 million compared to DKK 179 million in the same quarter last year, although the EBITDA margin was maintained. In general, demand has been softer in 2024, but GPV continues to invest for the long-term and expects the trend to turn in the second half of 2024.
The Knowledge Base: A CM’s Perspective on Box Build Practices
04/30/2024 | Mike Konrad -- Column: The Knowledge BaseIn the ever-evolving landscape of electronics manufacturing, the box-build process stands out as a critical phase that bridges the gap between individual component manufacturing and the delivery of a fully functional electronic system. This intricate procedure, encompassing the assembly of everything from PCBs to wire harnesses and mechanical enclosures, demands a high level of precision, efficiency, and innovation. As the electronics assembly industry expands and diversifies, understanding the best practices within box-build assembly has become paramount for manufacturers aiming to stay ahead in a competitive market.
I-Connect007 Editor’s Choice: Five Must-Reads for the Week
04/26/2024 | Andy Shaughnessy, Design007 MagazineIn this week’s roundup, we have a variety of articles covering everything from design through assembly, and even box build. I’ve always wondered whether box build was all it was cracked up to be. Do customers really pick one EMS provider over another because one company offers box build? And if you’ve ever wanted to volunteer, IPC’s Thought Leaders Program is looking for a few good technologists to help them on their mission. Check out Stanton Rak’s article, which was published in the spring issue of IPC Community.