Dell warns Taiwan notebook ODMs against producing white-box servers

Aaron Lee and Ninelu Tu, Taipei; Joseph Tsai, DIGITIMES [Wednesday 7 November 2012]

As Taiwan-based notebook ODMs such as Quanta Computer and Wistron have stepped into producing white-box servers targeting the Internet data centers of clients such as Google and Facebook, Dell's president of Enterprise Solutions, Harius Haas has expressed the company's discontent, warning that it will decrease investment in ODMs that have undertaken such production.

Commenting on Haas's statements, sources from the upstream supply chain confirmed that the vendor has already started reducing its orders to certain ODMs.

Haas pointed out that Dell likes to cooperate with ODMs to create value for the server market and is willing to strengthen its cooperation with ODMs by providing investment during product development; however, if ODMs decide to compete for orders directly from clients, it will force the company to reduce its investments.

To pacify clients, Wistron has already transferred all white-box server orders to its subsidiary; however, Quanta, which did not spin off its white-box server business, is seeing its orders from Dell shifting away to Inventec. 85% of Dell's server orders are currently handled by Foxconn Electronics (Hon Hai Precision Industry), Wistron and Inventec.

Although losing orders from Dell, Quanta continues to see revenue growth in its white-box server business, while revenue contributions have risen from 40% in 2011 to 60% in 2012, and the company has also landed orders from clients such as NEC, Fujitsu and Cisco.

Harius Haas, Dell's president of Enterprise Solutions
Photo: Shihmin Fu, Digitimes, November 2012