Despite progress in inventory clearance and the boost from artificial intelligence (AI) applications, supply chain players remain cautious about the peak season benefits for consumer electronics in the second half of 2024. The AI market, however, continues to show robust demand, particularly for AI servers. Even with reports of potential delays in the next-generation Blackwell chip, the demand for AI servers remains a crucial growth driver for supply chain companies.
Foxconn
Foxconn, in its recent earnings call, highlighted the strong demand for AI servers, including its existing H-series products, which have shown solid visibility. The company reiterated its expectation that AI servers will account for 40% of its total server revenue in 2024. Foxconn also reported a surge in demand for next-generation AI cabinet solutions, which it expects to significantly boost its server revenue in 2025. The company is confident that AI servers will soon become a trillion-dollar revenue stream.
Since the start of 2024, the H-series has been a key growth driver, with Foxconn's server revenue more than doubling in the first half of the year. With market demand remaining robust, the company sees better visibility than in previous years. Even if the Blackwell chip is delayed, Foxconn does not expect it to impact the contribution of AI servers to its 2024 revenue.
Quanta
Quanta shares Foxconn's optimism, believing that demand for AI servers will remain strong in the second half of the year despite potential delays in new chip releases. Wistron echoed this sentiment, indicating that AI server demand will continue to grow on a month-by-month basis.
Quanta reported that AI server shipments in the second quarter of 2024 exceeded expectations, with AI servers now accounting for more than 50% of its server business revenue. This surge has pushed server revenue to comprise over half of Quanta's total revenue. The company forecasts triple-digit growth in AI server revenue compared to 2023.
Wistron
Wistron, which holds orders for AI server baseboards and modules from chip giants NVIDIA, AMD, and Intel, is also on track to achieve triple-digit growth in AI server revenue.
The company expects AI server revenue to grow by double digits in the third quarter compared to the second quarter and maintains its forecast for strong growth in the second half of the year. Wistron remains confident in achieving its target of triple-digit annual growth in AI server revenue.
Credit: DIGITIMES
Pegatron
Pegatron, a latecomer to the server market, is targeting both large CSPs (Cloud Service Providers) and smaller players. However, the unpredictable nature of orders from these smaller customers makes it difficult to estimate when and whether AI servers will significantly contribute to revenue.
Pegatron is also focusing on regional and national data centers, particularly in markets like the Middle East and North Africa, where large CSPs may yet dominate their markets. Additionally, there is demand from smaller CSPs in North America. Although these customers' needs might be smaller in scale, they still offer significant business opportunities.
Pegatron began small-scale shipments of AI server products to North American customers in February 2024, focusing on server assembly and testing. The company expects continued demand in the third quarter and plans to launch Blackwell-equipped products in the fourth quarter. To meet market demand, Pegatron is planning to expand its AI server capacity.
Despite widespread speculation about potential delays in the Blackwell chip, the overall growth of AI servers across the supply chain remains unaffected.
The market indicates that as long as demand for AI applications persists, so will the demand for AI servers, regardless of whether it's the current H-series or the forthcoming Blackwell. However, while driving revenue growth, companies must also focus on the profitability of AI servers.
For example, Quanta has a higher ratio of AI server cabinet shipments, while Wistron focuses more on key components. As the new generation of AI server cabinets, despite their higher prices, could bring thinner margins, Foxconn is emphasizing vertical integration and different transaction models to maintain profitability.
