The supply chain of vendors that build servers and network communication devices is accelerating its shift of production out of China to Taiwan and North America, along with other nations not subject to the trade war between the U.S. and China.\nLast May, the Trump Administration levied tariffs on a number of imported Chinese goods, computer components among them. The tariffs ranged from 10-25%. Consumers were hit hardest, since they are more price sensitive than IT buyers. PC World said the average laptop price could rise by $120 just for the tariffs.\nBut since the tariff was based on the value of the product, that means server hardware prices could skyrocket, since servers cost much more than PCs.\n\nBut since the tariff was based on the value of the product, that means server hardware prices could skyrocket, since servers cost much more than PCs.\nCompanies that are moving production out of China\nThe Taiwanese tech publication DigiTimes reported (article now locked behind a paywall) that Mitac Computing Technology, a server ODM, reactivated an old production line at Hsinchu Science Park (HSP) in Taiwan at the end of 2018 and restarted another for motherboard SMT process in March 2019. The company plans to establish one more SMT production line prior to the end of 2019.\nIt went on to say Mitac plans to produce all of its high-end U.S.-bound servers in Taiwan and is looking to move 30% of its overall server production lines back to Taiwan in the next three years.\nWiwynn, a cloud computing server subsidiary of Wistron, is primarily assembling its U.S.-bound servers in Mexico and has also recently established a production site in southern Taiwan per clients' requests.\nTaiwan-based server chassis and assembly player AIC recently expanded the number of its factories in Taiwan to four and has been aggressively forming cooperation with its partners to expand its capacity. Many Taiwan-based component suppliers are also expanding their capacity in Taiwan.\nSeveral ODMs, such as Inventec, Wiwynn, Wistron, and Foxconn, all have plants in Mexico, while Quanta Computer has production lines in the U.S. Wiwynn also plans to open manufacturing facilities in eastern U.S.\n\u201cThis is not something that just happened overnight, it\u2019s a process that started a few years ago. The tariffs just accelerated the desire of ODMs to do it,\u201d said Ashish Nadkarni, group vice president for infrastructure systems, platforms and technologies at IDC. \u201cSince [President] Trump has come into office there has been saber rattling about China and a trade war. There has also been a focus on margins.\u201d\nHe added that component makers are definitely moving out of China to other parts of Asia, like Korea, the Philippines, and Vietnam.\nHPE, Dell and Lenovo should remain unaffected\nThe big three branded server makers are all largely immunized against the tariffs. HP Enterprise, Dell, and Lenovo all have U.S.-based assemblies and their contract manufacturers are in Taiwan, said Nadkarni. So, their costs should remain unaffected by tariffs.\nThe tariffs are not affecting sales as much as revenue for hyperscale whitebox vendors is being stressed. Hyperscale companies such as Amazon Web Services (AWS), Microsoft, Google, etc. have contracts with vendors such as Inspur and Super Micro, and if prices fluctuate, that\u2019s not their problem. The hardware vendor is expected to deliver at the agreed cost.\nSo margins, already paper thin, can\u2019t be passed on to the customer, unlike the aforementioned laptop example.\n\u201cIt\u2019s not the end customers who are affected by it, it\u2019s the vendors who are affected by it. Certain things they can pass on, like component prices. But if the build value goes up, that\u2019s not the customers problem, that\u2019s the vendor\u2019s problem,\u201d said Nadkarni.\nSo while it may cost you more to buy a laptop as this trade fracas goes on, it shouldn\u2019t cost more to buy a server.