Hyperscalers - MZ Weekly Thread for February 24, 2025
Trump tariffs and incentives are shaping North American manufacturing capacity with focus on US domestic production. So far, US markets most likely to be impacted include semiconductors, consumer electronics (including components), automotive electronics, and equipment used in broadband and telecommunications industry.
AI is part of Trump's America First Investment Policy. Apple recently announced it will spend more than $500 billion over the next four years expanding teams and facilities in Michigan, Texas, California, Arizona, Nevada, Iowa, Oregon, North Carolina, and Washington with plans for a new factory in Texas. Apple's intentions include accelerated investments in AI and silicon engineering.
I see an increase in U.S. manufacturing jobs and hyperscalers and broadband and telecommunications equipment manufacturers getting a lot of attention and money as 2025 unfolds.
It was just a few weeks ago hyperscalers committed to hundreds of billions of infrastructure spend with most citing 1+ GW campuses. I've written about hyperscaler infrastructure and the extended supply chain for years and I understand their relationships with contract EMS providers, ways supplier-customer business deals are structured and how profitable telecom and complex broadband equipment programs can be for CMs.
I have an ear to-the-ground in extended hyperscaler CM supply chains and although I am beginning to hear mixed messages on revising down forecasts for some hyperscalers, with some analysts signaling a possible market top, my view is this is only pause as new an innovative ways to scale compute power continue to evolve, and equipment firms was to gain a better sense of demand and costs tied to scaling capabilities as evidenced by Elon's comments regarding infrasctructure development and deployment of X's latest AI, Grok 3 Beta.
Mark Zetter
Mixed signals
Some analysts are signaling a top in AI hyperscaler manufacturing based on some hyperscalers canceling infrastructure investments on a large scale supporting the idea electronics hardware equipment supporting AI is in a bubble.
I place less value on these rumblings because there will continue to be ongoing need for compute and infrastructure investment in servers, GPUs and CPUs to feed a soon-to-explode demand for AI system-to-system agents (v system-to-person) and real AI inference driving manufacturing automation and S&OP efficiency between supply chain functional groups and vendors and suppliers.
Mark Zetter
This view is further underscored by the Trump-Vance Administration considering "new or expanded restrictions on United States outbound investment in the PRC in sectors such as semiconductors, artificial intelligence, quantum, biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy..."
All of that capital previously targeting China's massive, global electronics supply chain ecosystem will, instead, be diverted to expanding U.S. manufacturing production and technical capabilities.
I see a great manufacturing renaissance in the US.
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About
What matters when formulating contract electronic strategy? How do you identify supplier profit centers and what are you doing to protect against margin erosion for your outsourcing programs? Why do provider capabilities often not match capabilities they claim? How are you benchmarking your supply chain against competitors?
I’ve spent 25+ years in contract electronics industry setting up contract electronic divisions and running operations, protecting EMS program profits, manufacturing capacity M&A and more. I run a technology solutions firm. A lot of times this means asking the right questions.
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