Server supply chain becomes fragmented

But it's not only Taiwan-based server ODMs that are looking to Southeast Asia. US-based CSPs have been establishing SMT production lines in Southeast Asia since late 2022 to mitigate geopolitical risks and supply chain disruptions. 

Quanta has – due to its geographical ties – established several production lines in its Thai facilities centered around Google and Celestica, aiming to build client loyalty. Meanwhile, Foxconn has refurbished its existing facilities in Hanoi, Vietnam, and is serving customers from its Wisconsin facility. Wistron and Wiwynn are both building assembly plants and SMT production lines in Malaysia. The present strategy of Inventec is similar to that of Quanta, with plans to develop SMT manufacturing lines in Thailand by 2024 and begin server production in late 2024, TrendForce reports.

The analysts at TrendForce suggest that these 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.