Global shipments of servers decreased in the first half of the year due to relocation of production lines for data centers, Taipei-based market researcher TrendForce Corp (集邦科技) said in a report yesterday, as it predicted a decline in server shipments in China this year.

While original design manufacturers (ODM) have since last year been moving their production lines out of China due to its escalating trade dispute with the US, the relocation process has nonetheless affected the entire supply chain for servers, the researcher said.

This has resulted in sluggish demand from the data center market in the first six months of this year, which was further dampened by the unresolved US-China trade dispute, TrendForce said.

“ODM partners of Microsoft Azure, Google and a few other cloud service providers in the US have moved their L6 [level 6] lines to Taiwan as requested by their clients. The issue is that the production yields from these lines have dropped following their relocation, leading to downward corrections in shipments,” TrendForce senior analyst Market Liu (劉家豪) said in the report.


The yields of the relocated L6 lines would not return to their normal levels until the end of this year or next year, Liu said.

However, server shipments for Amazon Web Services, Inc’s cloud computing arm and Facebook Inc are expected to remain steady, despite production lines remaining in China, as the companies are willing to absorb the costs associated with higher US tariffs, Liu added.

TrendForce also predicted that total annual server shipments in China this year would decline by 4 percent year-on-year due to the US’ export restrictions on several major Chinese data center suppliers, including Huawei Technologies Co (華為) and Dawning Information Industry Co (中科屬光), which is also known as Sugon.

However, Chinese server maker Inspur Group Ltd’s (浪潮集團) shipments are expected to increase 10 percent on an annual basis by the end of the year, as the company benefits from transfer orders, since most of the companies that build and operate large-scale data centers still use China-made servers.