In addition, the effects of the rising white-box servers and Chinese brands on the Taiwanese server contract manufacturing industry have been felt. Server ASP (Average Selling Price) however slipped further due to the growing maturity of the industry. Accordingly, the industry's shipment value in the fourth quarter of 2013 declined, down 19.1% year-on-year, to about US$1.23 billion.

Affected by the improvement in virtualization technology and computing chips, enterprises' demand for servers has been decreasing. Small-scale server rooms are being replaced by enterprise cloud applications provided by large-to-medium-sized datacenters. Cloud service providers dedicated to datacenter management such as Amazon and Microsoft are now able to manage hardware with more efficient solutions.

Small- and medium-sized enterprises can reduce hardware maintenance and purchase costs by renting cloud services. This however led to a growth slowdown in the global server market. Shipment volume of Taiwanese server system totaled about 4.73 million units in 2013, declining merely 1% compared to 2012.

The major engine of growth for the global server market in 2014 is expected to be the increasing shipment for white-box servers and Chinese homegrown servers, both of which are expected to grow flourishingly. The growth of white-box servers however is going to hinder shipments of US and European branded servers. Given the fact that the overall market demand for servers is not going to see a prominent increase, the overall market growth therefore is expected to remain stagnant in 2014.

Looking ahead to the first quarter of 2014, traditionally a weak season for servers, the server system industry is expected to see a shipment volume of 1.39 million units, down 3.3% sequentially. Shipment value is estimated at approximately US$1.39 billion in the same quarter, representing a 14.3% sequential decline.

The decline in the first quarter is mainly ascribed to the fact that enterprises' rush to purchase new servers and server solutions is normally concentrated on the second half of the year. The first half is a common weak shipment season for server systems and this year is no exception.

Figure I: Taiwanese Server Full System and Barebone Shipment Volume, 3Q 2011 - 4Q 2014