According to statistics of the ITIS project -a project initiated by Taiwan's Ministry of Economic Affairs and conducted by Taipei-based MIC -- the Taiwanese server motherboard industry's shipment volume is expected to reach 1.16 million units in the third quarter of 2008 and 1.17 million units in the fourth quarter, representing slight growth rates.
In the second quarter of 2008, brand-name vendors continued to increase x86 server outsourcing orders. The Taiwanese server motherboard industry reached a shipment volume of 1.14 million units in the second quarter of 2008, up 6.7% year-on-year and up 2.0% sequentially. Originally it was expected that Taiwanese server motherboard makers would have the opportunity to transfer costs resulting from rising raw material prices to brand-name vendors. However, due to the intense low-price competition in the past several quarters and the fact that branded vendors did not agree with increases in outsourcing costs (white-box market leaders Supermicro and Intel did not go along with price increases), in the current market environment some manufacturers have to absorb the rising costs themselves. It is expected that the ASP (Average Selling Price) of the Taiwanese industry is expected to remain at approximatelyUS$193 until the end of 2008.
Shipment value of the Taiwanese server motherboard industry reached US$221 million in the second quarter of 2008, growing 4.6% year-on-year and 1.8% sequentially. With the technology capabilities and cost advantages of Taiwanese makers in the x86 server segment, Google and Rackable System continue to rely on Taiwanese server motherboards.
Statistics of the Taiwanese server motherboard industry in the second quarter show that the subprime mortgage crisis in the United States and the continuing rises in oil and other raw material prices have started to have a domino effect on the motherboard manufacturing segment in the Taiwanese server industry. Component prices of motherboard products have been falling and market demand is moving towards value-line products. This has caused the profit margins of some second-tier server motherboard makers to fall, forcing them towards sectors with higher added value, such as IPC (Industrial PC) or embedded applications.
Taiwanese EMS companies have made aggressive deployments in the x86 server segment in the past several years. It is expected that the shipment share of EMS companies in the Taiwanese server industry will rise from 14% in 2008 to more than 16% in 2009. This competition and threat cannot be ignored by Taiwanese ODM server makers, which are good at R&D and design. The differences between core competencies of EMS and ODM makers are becoming less clear (ODM core competencies are design, flexibility, speed; EMS core competencies are cost management, global logistics and services). The competition between EMS and ODM companies is intense.
Achieving balance between computing capabilities, reducing electricity expenses, and system cooling costs has become a key issue for server makers in product design. Processors account for approximately 30% of server system power consumption, and only relying on power savings in processors is not enough. Peripheral hardware, such as memory and hard disk drives, also account for a significant share. A comprehensive plan is necessary, ranging from components to system design. HP, Sun, and IBM rolled out data center solutions in the second quarter, and they considered a variety of factors, including electricity equipment, cooling systems etc. In this way they aimed to create even more comprehensive green, environment-friendly data center products for their clients. These products also represent market opportunities for Taiwanese server motherboard makers.
More information can be found in the following MIC report: The Taiwanese Server Motherboard Industry, 3Q 2008
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About MIC
Market Intelligence Center, based in Taipei, Taiwan, was founded in 1987. MIC is Taiwan's premier IT industry research and consulting firm providing intelligence, in-depth analysis, and strategic consulting services on global IT product and technology trends, focusing on markets and industries in Asia-Pacific. MIC is part of the Institute for Information Industry. https://mic.iii.org.tw/english
About ITIS
The ITIS (Industry and Technology Intelligence Services) project is managed by the Department of Industrial Technology of Taiwan's Ministry of Economic Affairs. As part of the project, research is conducted in a variety of fields, including the ICT sector. The project serves both the public and private sector.