HP-Foxconn Alliance Targets Growing Hyperscale Server Market

Archived Published: 06 May 2014 ID: G00264197

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A new alliance between HP and contract manufacturer Foxconn should help drive adoption of hyperscale server technologies. It will also limit the opportunity for traditional rivals and new market entrants to counter the initiative.

News Analysis


On 30 April 2014, HP and the Taiwanese contract manufacturer (CM) Foxconn Technology Group announced that they have entered into a nonequity joint venture agreement. Together they will design, build and ship a line of servers that specifically targets the needs of large service providers, hosters and enterprises that are building out infrastructure for cloud computing, big data, high-performance computing (HPC) and other hyperscale deployment. HP and its channel will fullfil product delivery and support for technology created under the joint venture, which will be exclusive for future business between Foxconn and service providers, although existing relationships will continue for contractual reasons. Under the terms of the agreement:

  • Foxconn and HP will jointly develop and own intellectual property created under the joint venture.

  • HP will continue to invest in and sell its own server designs (including existing scale-out servers like Moonshot and ProLiant SL) alongside designs from the joint venture.

  • HP will own the right to make technology available to the joint venture.


Foxconn is a leading CM that builds technology under license for vendors like HP, Cisco and Apple. This joint venture will enhance its credibility and awareness in the global IT market. The alliance will also help HP maintain its competitiveness in the server market. HP is the volume market leader for x86 servers, and is already strong in its support for the evolution of conventional data centers. But HP (and its traditional rivals) are vulnerable to the shifting buying behaviors of large enterprises and service providers that are investing heavily in hyperscale workloads. These buyers consider conventional server designs overengineered and overpriced for their new requirements. The joint venture should help HP attain growth in the new sector, while reducing the impact on its traditional business, and position it to exploit the loyalty of users that prefer to stick with a known brand, rather take the risk of bringing new names like Quanta and Wistron into the data center. The joint venture could also benefit vendors of processors and other ancillary technology, as it enables them to use HP and Foxconn to bring products to market. This alliance also:

  • Reinforces HP's credibility in the emerging hyperscale market, without diverting too many resources from its legacy businesses.

  • Blocks rivals like Cisco and Dell from entering into this kind of venture with Foxconn (although they could engage with another CM or original design manufacturer to achieve similar goals).

  • Reduces the probability that Foxconn could create its own marketing, sales and support structure to compete openly with HP as a branded server vendor in its own right.

HP needs to position and clearly differentiate its “classic” server ranges from the new HP/Foxconn technology, to prevent confusion in its installed base and unnecessary cannibalization of existing business. Another issue is whether the joint venture products will achieve true compatibility with or compete with Open Compute technology. The increasingly popular industry movement Open Compute is a collaborative effort by service providers, users and vendors to define standard interfaces and hardware technologies for systems where there is no justification for proprietary extensions.


Service providers:

  • Add HP/Foxconn solutions to your shortlist if they deliver important capabilities that are not available from alternative vendors.

IT leaders:

  • Defer buying HP/Foxconn solutions unless HP can demonstrate differentiation from existing HP scale-out servers.

  • Evaluate Open Compute standards as an alternative for hyperscale investments.

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