According to Digitimes server orders from ODMs are slowing because of the slump in sales for smart handheld devices falling. This has led to a reduction in demand for cloud computing services. In fact the server market is not likely to recover until the second half of 2016 or 2017.

The server makers are hoping the dip is temporary because wearable devices and Internet of Things (IoT) applications will start to suck up existing capacity. IT enterprises will need to buy more servers to cope with the extra demand.  At least that is the theory.

Many vendors have turned from first-tier Internet service providers to look for orders from second- or third-tier datacenter players. Dell established a new department and released a new series of servers specifically for small-to-medium-size datacenter players. Vendors such as the maker of expensive printer ink HP, Foxconn, Quanta, Wiwynn, Mitac International and Inventec have also been aggressively finding clients from the same segment.

With first-tier Internet service providers having been splitting their server orders among different ODMs to avoid risks and reduce costs, most server suppliers are seeing their profits seriously impacted and are turning to smaller players to maintain their gross margins.