xFusion x86 Server Shipment Forecast Faces Headwinds, Bottoming

Huawei Server Shipments Bottom Out and Rebound: Q3 Forecast Up 1

Core Overview: The First Ray of Light After Business Restructuring Huawei China server shipments saw a significant turnaround in the third quarter (Q3) of 2022 after experiencing a cliff-like drop for several consecutive quarters. The latest forecast data shows shipments for the quarter were 9.0 K units (9.0 K pcs), achieving a 100% Quarter-on-Quarter (QoQ) growth compared to the historical low of 4.5 K units in the previous quarter. Although this figure still shows a huge gap compared to the peak of nearly 200,000 units in a single quarter in 2020, this "bottoming out and doubling" trend strongly suggests that Huawei's server business has preliminarily completed its strategic bottoming after divesting the x86 production line and has begun seeking growth on new architectures. Key Details: Structural Upheaval from x86 to ARM/AI Observing the long-term data series, Huawei server shipments suffered a structural collapse starting from the second half of 2021, plummeting to 18.0 K units in December 2021, and subsequently hitting bottom. The main cause of this violent fluctuation was the complete divestiture of the x86 business (xFusion) to cope with the supply chain disruption crisis caused by US sanctions. The latest shipment volume of 9.0 K units essentially represents the independent performance of Huawei's "pure-blooded" servers—namely general-purpose servers based on Kunpeng processors and AI computing servers based on Ascend. This quarterly increase of 4,500 units reflects that the rigid demand for domestic computing power in China's domestic IT Application Innovation (Xinchuang) market is being unleashed. Deep Attribution: Dual-Wheel Drive of AI Computing Power and Domestic Substitution Market analysis points out that the restart of Huawei's server business mainly benefits from China's urgent demand for "autonomous and controllable" computing infrastructure. According to reports from Huawei centers and market research, as US export controls on high-end AI chips (such as NVIDIA A100/H100) intensify, AI servers based on the Ascend 910 series have become an important alternative solution for China's large internet companies and operators. In addition, the increasing penetration rate of the Kunpeng ecosystem in government and financial sectors has also provided foundational support for shipment volumes. This data rebound in Q3 can be seen as a signal of the market shifting from wait-and-see to actual procurement, showing that clients are beginning to adapt to and deploy non-x86 architecture solutions. Outlook and Risks: Capacity Ramp-up and Ecosystem Challenges Short-term (1-2 months): With year-end budget execution and the peak acceptance of Xinchuang tenders, it is expected that Q4 shipments are likely to maintain double-digit QoQ growth. However, limited by advanced process capacity, explosive growth is difficult to achieve. Medium-term (3-6 months): The focus will fall on the supply stability of Ascend AI chips and the maturity of the software ecosystem (CANN). If Huawei can continue to break through capacity bottlenecks such as CoWoS packaging, its AI servers are expected to seize more share in the Chinese market. However, potential risks remain in the further tightening of US sanctions and the high transition costs for clients migrating from x86 to ARM architectures, which will limit the speed of its return to peak scale. Web Search References https://vertexaisearch.cloud.google.com/grounding-api-redirect/AUZIYQGV8RoqkvI1Nn1YhdbB2L7KWBDQiyEK1lhguBiN-0AYlllm2ACus3BaC_Lv_Zqb8p-_mVR1Pto4nXIdUNRp5snJkXEWC1M1Hyk62QUoSCs1L5zUPj81Jg8t-R_DNckJ_mBKq_FtLL5gIDyEoDbNSLkZ5qtIbtFvP5mMmvvoOuEmUjQC-s7bTIHHG0p3SkKPGlnuac-fNGfx18WS7Y94tjlFrpoq0UY= https://vertexaisearch.cloud.google.com/grounding-api-redirect/AUZIYQEORuG8NQt9g4tSe6YMfxhRunQZo3C-dHaF2J5goemEAdFGltewETpOOYJVmy0Xtq_sHo7SGoV5_fvIzsM9Kb7TDjaqi_lf1kjdUAalWyuoUtMRAsqI-K60x0BzDfuEpLeyBydeXeSvebPV5wt3KQS6WdF8QCLLAQILXIahakQgy3US9a9Meg== https://vertexaisearch.cloud.google.com/grounding-api-redirect/AUZIYQHj0NOEsBuzik6kMzYT92VKS1Ps-JUP49S1mOOHV5zFqeeO0Qeop19-xemSGIc74tA-1B7QNF3quugqzMCuQvnl5Ff6OXcOfdDVY2rc1lC6IWu2tjq7br4KIXOGO2hrHpaoiH5a3Exxk-trcRnNjCjV7EWUcjLuKM-fgVU7FElI_PHFO5y2IeuDE_OQ8JyCvT-YuA8nmQ==