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HP and Foxconn close joint server company

by on23 October 2017

Dissolving the joint because the synergies didnt breed

A joint venture server company established three years ago by HPE and Foxconn has been quietly dissolved recently for the terrible crime of failing to breed enough synergies.

In 2014, HPE collaborated with Foxconn, the world's top server motherboard supplier, to set up a joint venture company dedicated to producing cloud servers. At the time the news generated the same level of shock to the global server industry as a headline implying that Inhumans would get a seven season refresh would to the television industry.

It was all about synergies which apparently would be everywhere.  In fact you could not go to a HP or Foxconn loo without a synergy popping up and stealing your bog roll.  At that time, Foxconn chairman Terry Guo said that as the new generation of cloud computing would thoroughly alter the global server market, the JV would subvert the server industry ecosystem. HPE was originally expecting to get a slice of the cloud server market by taking advantage of Foxconn's robust manufacturing capability, so as to offset its declining business in the corporate server market.

But it turned out that the synergies were not having any of it. Apparently they are shy creatures and refused to breed in HPE and Foxconn's captivity.  To make matters worse there were high marketing and logistics costs which also undermined the JV's pricing competitiveness in the cloud server market, in which customers are concerned more about  prices than brand loyalty.

The JV's closure will pose quite a limited impact on HPE due to the marginal revenue contribution ratio involved and Foxconn is shrugging off the rest of the cost, which it will be making up in not having to spend money on stolen loo paper - and brand server vendors will still have to rely on the company to support their server production.

Now that it is without a JV with any brand server customer, Foxconn is likely to make forays into the cloud server market, constituting serious potential impact on existing white box server suppliers. Given Foxconn's tremendous manufacturing capabilities and close ties with firms engaged in cloud services, the sources said, its next move for the server maket may create a huge impact on the white box server market.

Last modified on 23 October 2017
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