Server chassis maker Chenbro Micom estimates as much as 50% of customer orders were affected by the COVID lockdowns in China during April.
Chenbro president Corona Chen said the company has resumed production and shipments.
Relevant supply chains are confident in the second half of the year based on several factors. For one, servers, unlike smartphones and notebooks, are less impacted by inflation. Additionally, US-based cloud service providers continue to expand capital expenditures.
Chenbro has chassis orders from customers in the two major server markets: China and the US. Chen pointed out that server demand from Chinese and American customers has been strong in the first half of 2022. Had it not been for the instability in the supply chain and disruptions in logistics caused by the lockdowns, operational growth would have been even stronger. Chenbro's revenue in first-quarter 2022 posted a record high of NT$2.09 billion (US$70.11 million).
Chenbro's monthly revenue dropped 36.07% in April due to the lockdowns and saw an on-year decrease of 31.59%. Chen said 50% of April orders were affected by the lockdowns. The company has been actively trying to catch up since resuming production and still hopes to maintain its original double-digit full-year revenue growth target.
Chenbro set up a new factory in Chiayi, Taiwan, in addition to its two existing factories in China (Kunshan and Dongguan), in response to the US-China trade war. The Chiayi factory began mass production in 2022; however, it was unable to immediately provide complementary capabilities when Chinese cities were suddenly locked down. Chen said Chenbro will continue to strengthen the independent and complementary capabilities of all three locations.
The Chiayi factory is still in its growing stage, said Chen. Initially, the factory relied on semi-finished products and raw materials from China, meaning it was also affected by the lockdowns. In the future, adjustments will be made so that the intended advantages of the Chiayi factory can be achieved. Chenbro expects the factory to make more significant contributions in the second half of the year.
The Chiayi factory currently has a monthly production capacity of 50,000 units. In second-half 2022, the factory will increase production capacity and introduce automated production. Monthly production capacity in the second half could reach 80,000-100,000 units. The Chiayi factory will also handle product lines related to new processor platforms.
Chenbro is cautiously optimistic about growth in 2022 due to strong demand from Chinese and US cloud data center customers and the release of new processor platforms in the second half by Intel and AMD, which will stimulate replacement demand. Chenbro is also actively developing its own brand of standardized products.
Order visibility for Chenbro's server customers is as long as six months. However, due to rapid changes in the industry, orders within three months are relatively clearer. In terms of when high inventory levels will return to normal, Chen said there is no clear answer, but Chenbro will continue to respond to the situation accordingly.
