- The Taiwanese Server industry's shipment volume is forecasted to reach 764,000 units in the second half, growing 8.2% from the first half of 2002. While volume growth is likely to be slightly inhibited by the slow economic recovery, corporate budget execution that typically takes place at the end of the year will ultimately boost shipments in the third and fourth quarters.
"The slower economy is in some respects stimulating Taiwanese server shipment volume," said Peter Lin, Industry Analyst with Market Intelligence Center (MIC). "As international vendors face growing cost-down pressures in the value-line market, they are increasingly outsourcing to Taiwanese server manufacturers." Compared to the first half of 2002 shipment value is expected to grow 5.3% by the end of 2002.
According to MIC, in the second quarter of 2002 shipment value experienced a 1.6% year-on-year drop to US$305 million due to falling component prices. Second quarter shipments also failed to meet expectations. With continued inflation in Europe, lower corporate IT expenditures, and the HP - Compaq merger, shipment volume reached 340,000 units, only 3.7% growth from the same period in 2001.
"In addition to considerably dampening shipment growth, the effects of the HP - Compaq merger can be seen throughout the Taiwanese server industry," said Lin. "Loss of HPQ orders caused a substantial drop in OEM/ODM production, and with fewer Taiwanese shipments to the company's Singapore hub, Asia Pacific shipments saw a steep decline." Shipments to Asian Pacific countries exclusive of Japan, China, and Taiwan, fell from 23.3% in the first quarter of 2002, to 14.2% in the second quarter. However, Lin added that growing demand from Chinese vendors brought about an increase in China-bound shipments during the second quarter, which grew from 7.2% in the first quarter to 8.2%. The US remained the main shipment destination, absorbing 42.5% of total shipment volume.
The Taiwanese server industry is exhibiting a more pronounced increase in the share of servers with Intel-based architecture. "This increase is a reflection of international vendors outsourcing a greater percentage of more standardized, value-line servers," Lin explained. "Additionally, Taiwanese manufacturers are much more familiar with Intel architecture." Share of Intel-based servers jumped from 77% in the first quarter of 2002, to 82% in the second quarter.
Commenting on the future of the Taiwanese server industry, Lin said that Taiwanese manufacturers are likely to gain a stronger edge through cooperation with Intel. "In order to strengthen its position in the high-end market, Intel is expected to increase its collaboration with Taiwanese server manufacturers, which will assist Taiwanese makers in securing a stronger hold on high-end server production," Lin said. "In addition, the Taiwanese server industry should see greater expansion of shipment volume as price competition between Dell, HPQ, and IBM intensifies."