Worldwide server market scale in the second quarter of 2003 is forecasted to reach approximately 1.3 million units. The Taiwanese market will account for 12,000 units, Hong Kong for 5,000 units, Singapore for 4,000 units, and China for 72,000 units, 23% of which will be bound for northern China, with 18% for southern China. Northern and southern China, Hong Kong, Taiwan, and Singapore, which have all been affected by the SARS epidemic, occupy a combined 4% of the worldwide server market, while US, European, and Japanese markets, which have not been significantly affected by SARS, account for a combined 75% of worldwide server market share. Thus, server shipments are not likely to see any major changes or declines in the second quarter of 2003.

Taiwanese server makers are mostly engaged in OEM/ODM business for leading US and Japan-based international brands such as IBM, HP, Dell, Sun, and NEC, which account for 95% of Taiwanese shipment volume. Server manufacturing outsourced from Chinese branded suppliers to Taiwanese makers does not reach even 5% of output. Taiwanese makers' China-based operations account for just 20% of total shipment volume, and supply chains are operating quite normally, with no factory shutdowns to date. Additionally, as leading vendors take at least six months in approving new outsourcing partners, vendors are unlikely to transfer orders to other makers in the short term.

SARS impact on the server industry in the second quarter of 2003 will be light, and with neither significant demand-side nor supply-side changes, estimates are that second quarter Taiwanese server shipment volume will continue to rise, hitting 426,000 units. As consumer and corporate markets implement measures to stop the spread of disease, estimates are that the epidemic will come under control in all regions during the third quarter of 2003, further easing the impact on the corporate server market. Additionally, the spread of SARS is anticipated to increase demand for offsite backup and e-commerce, stimulating corporate procurement of server equipment. As leading international server vendors continue to outsource with an eye to cutting costs, and with very little migration of orders to other makers, the Taiwanese server industry is foreseen to witness strong performance in 3Q 2003.