Southeast Asia ODMs to account for 23% of SMT production capacity in 2023, TrendForce research reveals

US-based CSPs have been establishing SMT production lines in Southeast Asia since late 2022 to mitigate geopolitical risks and supply chain disruptions. TrendForce reports that Taiwan-based server ODMs, including Quanta, Foxconn, Wistron (including Wiwynn), and Inventec, have set up production bases in countries like Thailand, Vietnam, and Malaysia.

What were the findings of TrendForce’s survey?

It’s projected that by 2023, the production capacity from these regions will account for 23%, and by 2026, it will approach 50%. TrendForce’s research report reveals that Quanta, due to its geographical ties, has established several production lines in its Thai facilities centered around Google and Celestica, aiming for optimal positioning to foster customer loyalty.

Foxconn has renovated its existing facilities in Hanoi, Vietnam and uses its Wisconsin plant to accommodate client needs. Both Wistron and Wiwynn are establishing assembly plants and SMT production lines in Malaysia. Inventec’s strategy mirrors that of Quanta, with plans to build SMT production lines in Thailand by 2024 and commence server production in late 2024.

CSPs aim to control core supply chain towards decentralization

TrendForce suggests that 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.

Google, with its in-house developed TPU machines, possesses both the core R&D and supply chain leadership. Moreover, its production stronghold primarily revolves around its own manufacturing sites in Thailand. However, Google still relies on cooperative ODMs for human resource allocation and production scheduling, while managing other materials internally.

To avoid disruptions in the supply chain, firms like Microsoft, Meta, and AWS are not only aiming for flexibility in supply chain management but also integrating system integrators into ODM production. This allows for a more dispersed coordination and execution of projects.

AI server supply chain garners traction

Initially, Meta heavily relied on direct purchases of complete server systems, with Intel’s Habana system being one of the first to be integrated into Meta’s infrastructure. This made sense since the CPU for their web-type servers were often semi-custom versions from Intel.

Based on system optimization levels, Meta found Habana to be the most direct solution. It was only last year that Meta began to delegate parts of its Metaverse project to ODMs. This year, as part of its push into generative AI, Meta has also started adopting NVIDIA’s solutions.

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