Taiwanese electronics manufacturer Compal Electronics opened a new AI server manufacturing center in Daxi, Taoyuan, on 11 August, converting an existing factory into a dedicated production site in roughly three months at a cost of NT$4.03 billion (approximately US$124.9 million). The facility will produce complete AI server systems, known in the industry as L10 assemblies, and rack-level solutions, known as L11, and is expected to begin contributing revenue progressively from the fourth quarter of 2026.
Compal said the new center is expected to double the company's AI server system production capacity. Chairman Ray Chen said the Daxi facility complements the company's ongoing expansion in the United States, tying the Taiwan buildout directly to a separate manufacturing push already underway in Texas.
Texas plants targeting 2027 ramp-up
Compal is building two plants in Texas dedicated to AI server manufacturing. Chen said both are scheduled to begin trial production by the end of 2026, with mass production following in early 2027. One of the two facilities, reported in April 2026, carries a construction cost of NT$2.9 billion (approximately US$92 million) and will serve as the company's AI server manufacturing base in the United States, handling assembly of high-end server systems alongside a dedicated repair center.
"Combined with the planned full-scale ramp-up of our Texas facility in the United States next year, we are highly confident in the growth momentum of our AI server business in 2027," Chen said at the Daxi opening. A separate manufacturing site in Vietnam is also being fast-tracked as part of the same expansion, according to Chen.
L10 and L11: what the Daxi plant actually builds
In server-manufacturing terminology, an L10 build refers to a fully assembled and tested server system — the complete unit ready for deployment — while L11 refers to rack-level integration, where multiple server units, networking equipment, power distribution and cooling are combined into a single rack-scale system before shipping to a customer's data centre. Rack-scale integration has become the more valuable and more complex segment of the business as AI workloads increasingly run on systems designed and sold as complete racks rather than individual servers, a shift that has pushed Compal and its larger rivals to invest specifically in L11 capacity rather than only expanding traditional server assembly lines.
Server revenue share climbing
Compal reported in May that it expects server revenue to reach 8 to 10 percent of total company sales in 2026, driven by rack-scale AI server systems ramping alongside the new Texas plant's move into operation during the second half of the year. The company's server business has grown on the back of demand from neocloud providers — smaller, specialized cloud infrastructure operators focused on AI workloads — which Chen described as the primary customer base behind this year's rapid growth in the segment.
Chen said Compal plans to expand beyond neocloud customers into the hyperscaler and enterprise markets as its Texas capacity comes online. The company's customer base has broadened from its traditional role as a PC original design manufacturer into AI server systems over the past several quarters, according to comments made at the Daxi facility opening.
Part of a broader Taiwan AI hardware buildout
Compal's expansion follows a pattern across Taiwan's electronics manufacturing sector this year, as contract manufacturers redirect capacity toward AI server systems amid sustained demand for computing infrastructure tied to AI model training and deployment. Wistron reported full-year 2025 revenue of NT$2.18 trillion (US$68.9 billion), up 108.4 percent year on year, while Quanta Computer posted record 2025 sales of NT$2.124 trillion, a 50.5 percent increase, with both companies citing AI server assembly as the primary driver. Quanta chairman Barry Lam has said order visibility for AI server systems now extends into 2027.
Foxconn, the largest of Taiwan's server assemblers, holds roughly 40 percent of the global AI server rack assembly market, according to industry estimates cited by Digitimes, with Quanta and Wistron each holding smaller shares behind it. Foxconn chairman Young Liu has said AI server rack shipments could double again in 2026. TrendForce projects AI server shipments across the industry will grow 28.3 percent this year, following a global AI server market that exceeded $455 billion in 2025.
Compal's strategy of converting existing factory space — as it did at Daxi — rather than building entirely new facilities from the ground up has allowed for a faster timeline than a standard greenfield construction project would typically require. The company's capacity additions in Taiwan, Texas and Vietnam mirror moves by larger rivals: Wistron has added a second Taiwan facility and a new plant in Dallas, while Foxconn has committed US$136 million to expanding AI server production in Mexico.
The Daxi center's opening comes as broader market volatility has hit Asian technology stocks in recent sessions, with shares in memory chipmaker SK Hynix and other AI-linked names falling alongside declines in comparable US technology stocks. Compal's stock performance was not detailed in connection with the Daxi announcement.
Diversifying beyond a single region
By combining expansion in Taiwan, the United States and Vietnam, Compal is positioning its AI server manufacturing footprint across three separate markets rather than concentrating production in any single country — a structure the company has said is intended to build a more diversified and resilient manufacturing network as demand for AI infrastructure continues to expand across its customer base. The approach mirrors a broader shift among Taiwan's server ODMs toward geographic diversification, driven partly by customers seeking supply chains less exposed to any single country's trade or tariff policy.
ODMs including Quanta, Wistron, Inventec, Wiwynn, Foxconn and MiTAC all reported double-digit or triple-digit year-over-year revenue growth in the January 2026 reporting period, with Taiwan's server supply chain entering what several suppliers described as its strongest first quarter on record. Quanta said AI servers accounted for more than 70 percent of its total server revenue in the fourth quarter of 2025, approaching an internal target of 80 percent for 2026. Full financial results tied to Compal's new Daxi facility are expected to become visible in the company's fourth-quarter reporting.