How AI Servers are Reshaping Taiwan’s Electronics Manufacturing Leaders

A seismic shift is underway in Taiwan’s manufacturing sector, with revenue charts revealing a trend few predicted just three years ago: AI servers are now eclipsing iPhones in terms of revenue generation for the island’s manufacturing powerhouses. For the first time in decades, these titans are witnessing their traditional consumer electronics businesses—the bedrock upon which they built their empires assembling smartphones and laptops—being overtaken by the burgeoning demand for artificial intelligence infrastructure. This marks a pivotal change, rewriting the rules of engagement for an industry deeply rooted in consumer electronics assembly.

What took Apple nearly two decades to achieve, AI servers have disrupted in a mere three years, highlighting an inflection point. Companies like Foxconn are actively navigating this transition, strategically diversifying beyond their conventional consumer electronics focus.

Taiwan’s Server Dominance: A Global Powerhouse

Taiwan’s commanding position in global server manufacturing has strategically positioned it to capitalize on the AI boom. The island accounts for over 90% of global AI server builds and roughly 80% of all server shipments worldwide. This dominance stems from decades of cultivated expertise in electronics manufacturing, originally honed in the notebook computer industry, which has since evolved into a critical advantage in the age of artificial intelligence. The concentration of specialized knowledge and infrastructure makes Taiwan a key player in the AI hardware landscape.

According to data released by Taiwan’s Ministry of Economic Affairs in October 2024, the island’s server production value from January to July 2024 reached NT$426.7 billion (approximately US$13.2 billion). This seven-month figure surpassed the total value for all of 2023, representing a staggering annual growth rate of 153.9% – a testament to the exponential growth in AI server demand.

Revenue Surges Echo Across Major Players

The impact of AI servers on Taiwan’s manufacturing giants has been transformative. Nvidia partner Wistron reported a revenue increase of 92.7% from January to July, while Quanta’s revenue grew by 65.6% during the same period. These figures reflect a broader trend impacting the entire ecosystem of Taiwan’s original design manufacturers (ODMs).

Foxconn, the world’s largest contract manufacturer, has arguably experienced the most dramatic shift. In the second quarter of this year, consumer electronics accounted for 35% of Foxconn’s total revenue, while the cloud and networking business represented 41%. This is a stark contrast to 2021, when consumer electronics comprised 54% of its revenue. This is the first time AI servers and cloud infrastructure have surpassed the company’s traditional smartphone manufacturing business, signalling a significant strategic realignment.

Quanta Computer’s Strategic AI Server Focus

Quanta Computer, a key supplier of AI servers powered by Nvidia chips, projects that AI servers are on track to contribute 70% of its total server revenue this year. This anticipated growth is fueled by improved yield rates and a steeper learning curve related to Nvidia’s GB300 chip-based servers. In the first half of this year, AI servers already accounted for over 60% of Quanta’s total server revenue.

Quanta, holding approximately 17% of the market, is the world’s second-largest server assembly contractor. Its primary focus is on AI server projects sourced from the four major cloud service providers (CSPs): Microsoft, Amazon, Google, and Meta. The company has already secured orders for Nvidia’s latest GB200 servers and is aggressively expanding production capacity to meet the escalating demand.

Wistron’s Strategic Positioning for AI Demand

Wistron has secured orders for Nvidia’s HGX Level 6 and DGX Level 10 servers and obtained orders for the new generation AMD MI300 series AI server boards. Demonstrating the urgency and magnitude of market demand, Nvidia recently booked an entire Wistron server plant in Taiwan solely for building AI servers, highlighting the strategic importance of securing manufacturing capacity.

Looking to the future, Quanta Computer is expanding its production capacity for AI servers in the US, with its factories there fully booked until the close of 2025. This capacity constraint reflects the “insane demand” that has characterized the AI server market throughout 2024 and into 2025, with no signs of abating.

Financial Impact and Market Share Dynamics

The financial transformation within the sector is striking. Quanta Computer CFO Elton Yang reported that AI servers are projected to account for 70% of the company’s total server revenue this year, with AI servers already representing over 60% of its total server revenue in the first half of 2025.

Wistron’s performance further validates the transformative impact of AI servers on manufacturing economics. From January to July 2025, the company’s revenue surged by 92.7% compared to the same period in the previous year. This exceptional growth underscores the premium nature of AI server manufacturing compared to traditional consumer electronics.

This ripple effect is felt throughout Taiwan’s server ecosystem, as companies secure multi-year production contracts extending well into 2026. This extended visibility into demand and revenue is a stark contrast to the shorter-term dynamics characteristic of the consumer electronics era, providing a more stable foundation for long-term investment and strategic planning.

Strategic Implications and Future Outlook

“The monthly sales jump for Taiwan ODMs in the first half of 2025 provides compelling evidence of this trend,” Robert Cheng, head of Asia technology hardware research at BofA Global Research, told Reuters, highlighting the surge in business for original design manufacturers like Foxconn that contract manufacture products for their clients.

This situation reflects a repositioning of Taiwan within the global technology supply chain. While companies once primarily competed on cost and manufacturing efficiency for consumer electronics, AI servers demand higher levels of technical sophistication, closer collaboration with chip designers, and more stringent quality control. This shift requires a more nuanced and collaborative approach to manufacturing.

“We believe this transition towards AI servers, in whatever form it takes, is ultimately beneficial for Taiwan’s tech industry,” Cheng noted, highlighting Taiwanese firms’ ability to rapidly adapt to the evolving needs of their customers, a key strength in a rapidly evolving technological landscape.

However, challenges lie on the horizon. Taiwan’s current dominant 90% share of the global AI server market may face erosion as manufacturers expand production in other regions. Companies are already establishing manufacturing facilities in the US, Mexico, and other locations to effectively serve local markets and comply with evolving supply chain requirements driven by geopolitical considerations.

Industry-Wide Transformation

The AI server boom is catalysing changes that extend beyond individual companies, fundamentally reshaping Taiwan’s entire electronics manufacturing ecosystem. Traditional boundaries between different types of technology products are blurring as manufacturers develop new capabilities and forge closer partnerships with leading AI chip companies. The increased focus on AI server manufacturing is encouraging collaboration between specialized firms and accelerating innovation.

This transformation underscores Taiwan’s unique position in the global technology supply chain. The potent combination of advanced manufacturing capabilities, established relationships with major technology companies, and close proximity to key semiconductor facilities provides a considerable competitive advantage that continues to drive sustained growth.

As artificial intelligence applications continue to demand increasingly sophisticated computing infrastructure, Taiwan’s manufacturers appear optimally positioned to capitalize on the escalating demand. The key challenge will be maintaining the country’s technology leadership position while adapting smoothly to changing geopolitical and market conditions which may necessitate more distributed global operations and diversified supply chains.

The shift from consumer electronics to AI servers stands as a testament to Taiwan’s inherent ability to reinvent itself in response to dynamic technological change, continuously adapt, and innovate, thereby maintaining its pivotal role in the global technology ecosystem.