Taiwan’s top computer maker to produce servers in US to tap AI boom

By News Room On Nov 21, 2023

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Taiwan’s Asustek Computer is building a server production line in the US for the first time as the personal computer maker seeks fresh growth catalysts from the boom in demand for artificial intelligence-powered equipment.

The world’s fifth-biggest computer maker, known for its Asus brand, is also growing its mini PC and smart manufacturing businesses, as the overall consumer electronics market remains sluggish.

Jackie Hsu, senior vice-president of Asustek, told Nikkei Asia the new era of AI-powered computing offered a good opportunity to grab more customers.

“We just kicked off our US production project in Silicon Valley, where we aim to assemble some semi-finished parts for our growing server system business. That will help us to be close to our customers in North America,” said Hsu, who is also co-head of Asustek’s emerging Artificial Intelligence of Things and component business. Production is set to start by early 2024, the executive said.

“For servers, we think having some manufacturing capacity close to market will be helpful for our business development,” he said. “Some server customers would want suppliers to have production close by.”

Asustek is also building a manufacturing site in the Taiwanese city of Taoyuan to produce its own motherboards, graphics cards, mini PCs and server-related products, which is also set to start production in 2024. The company is also evaluating whether to set up assembly production in Europe and other places to address customer demands, Hsu added.

“We are tapping into solutions for smart manufacturing and we need to demonstrate to our customers that our solutions work well in our own plants,” Hsu said. The executive said his company would not build massive production footprints but instead have in-house production only for some key product lines, including servers, connected devices and mini PCs.

Asus this year set a goal of growing its server business 500 per cent in five years. The Taiwanese computer maker is eyeing the massive AI boom, particularly by making server units that have AI chips or graphics processors to conduct parallel computing to train large language models and generate reasoning. Asus’s competitors, such as Quanta Computer, which builds servers for Google and Amazon, are also expanding production capacity for servers in California.

In 2008, Asus spun off its manufacturing division, which later became Pegatron, a major iPhone assembler and key supplier to Tesla. Asus then focused on brand marketing and product development while outsourcing all production to contract manufacturers. It started to get back into production about two years ago as part of a corporate transformation to expand its non-PC business, such as offering smart manufacturing solutions and systems.

The global PC market is forecast to decline more than 13 per cent in 2023 but return to mild growth of 3.7 per cent next year, according to market research company IDC.

Hsu said the overall PC market was relatively flat, but the “embedded or so-called industrial computing market” for increasing factory automation could continue to grow at a rate of up to 15 per cent every year on average. That is one of the key reasons Asus recently signed a technology licensing deal with US chip giant Intel to take over the latter’s NUC computing business, production and product designs and merge it with Asustek’s in-house mini PC division.

NUC was originally Intel’s flagship mini PC, a type of portable desktop computer. The company announced it would stop investing in its NUC unit this summer to focus more on its chip business.

Hsu said Asus saw good growth opportunities in the mini PC sector, as these computers were also popular in consumer gaming markets such as Japan and western Europe. They are also used across a wide range of industries, from hotels to hospitals, because they save space.

Mini PCs are also used in smart manufacturing, retail and transportation, among other industries, and Hsu said growth in this area would outpace the overall PC market.