Asia supply chain conference indicates AI compute demand remains strong, with supply tightness continuing
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Asia supply chain conference indicates AI compute demand remains strong, with supply tightness continuing
After visiting the Asian IT hardware supply chain, Barclays believes AI compute-related demand continues to exceed supply, with TPU, Trainium, GPU servers, data center switching, and power components benefiting the most, while PC and smartphone demand remains weak.
- Demand across the compute ecosystem continues to exceed supply, with no clear short-term relief in sight; capacity constraints, component shortages, and multi-source supply were key discussion points at the conference.
- Barclays expects CLS's TPU-related revenue to grow from about $1Bn in 2025 to more than $2.8Bn in 2026, more than doubling.
- The Trainium supply chain is expected to see unit growth of about 30%+ this year, weaker than TPU, but there is still upside if adopted by more cloud vendors.
- The outlook for general-purpose cloud CPUs has improved significantly, with unit demand discussion shifting from flat to 20%-40% growth, alongside higher ASPs.
- Switch demand is strong and is growing alongside compute spending. Scale-up Ethernet is still at an early stage, but it could become an ecosystem driver in 2027.
- Power and cooling demand is rising with higher per-rack power consumption; FLEX disclosed FY26 power revenue of $2.1Bn, up 61%, and JBL power revenue of about $600M/year, up 30%+.
- Pressure is greater on the device side, with the PC supply chain expecting full-year shipments to decline 5%-10%, smartphone demand remaining weak, and the sustainability of AAPL's promotion-driven momentum in China being questioned.
Report interpretation
Overview
This report is Barclays' conference notes following meetings with IT hardware and communications equipment supply chain companies in Asia. The core conclusion is that AI-related compute demand remains strong, with overall positive feedback from the supply chain, especially in TPU, Trainium, GPU servers, data center switching, power, and cooling; in contrast, end devices such as PCs and smartphones are more clearly affected by weak memory pricing and soft consumer demand.
Core views
Barclays continues to favor companies with higher AI exposure. The TPU ecosystem is expanding at or above prior expectations, with CLS seen as a key supplier for TPU and its variants; FLEX remains involved in related manufacturing, but its revenue growth may lag the broader ecosystem; JBL benefits from test equipment and certain switching equipment. Trainium growth is solid but smaller in scale than TPU, and the supply chain positions of FN and JBL received positive assessments. Strong ramps in GPU and AMD-related clusters are still expected by year-end, benefiting DELL, CLS, FN, JBL, FLEX, and ANET. Improving demand for cloud CPUs, switches, and power provides a better backdrop for EMS, ODM, and networking equipment companies; however, the PC and smartphone chains remain weak.
Analysis framework
The report is primarily based on Barclays' meetings in Asia with supply chain companies and industry participants, breaking down demand, capacity, share, and customer adoption signals across compute chips, server manufacturing, optical communications, switches, power/cooling, and end devices, and mapping these to covered companies and stocks mentioned in the material.
Methodology notes
Obtain signals on demand, capacity, share, and customer adoption through meetings and field visits.
The report is not a review of a single company's earnings; rather, it aggregates feedback from supply chain participants across the TPU, Trainium, GPU, cloud CPU, networking, power, and device value chain segments.
Overweight, Equal Weight, Underweight, and sector views of Positive, Neutral, and Negative.
Barclays stock ratings are based on expected 12-month total return relative to its coverage universe within the same industry, while sector views describe whether fundamentals and valuations across the covered sector are improving, stable, or deteriorating.
Map AI compute investment to EMS, ODM, optical communications, switching, power, and end-device companies.
The report emphasizes that different companies benefit in different ways: some benefit from TPU and Trainium manufacturing, while others benefit from GPU servers, 1.6T optical modules, scale-up Ethernet, or power/cooling upgrades.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Celestica Inc. (CLS)A core beneficiary of TPU, white-box switching, and scale-up Ethernet.
- Strengths
- Barclays believes CLS is a key supplier for TPU and its variants, and expects TPU-related revenue to exceed $2.8Bn in 2026; it is also viewed as a key beneficiary of expanding TAM in white-box switching.
- Weaknesses
- The addition of other participants in the TPU supply chain may create share disruption, and Meta-related white-box competition may become more intense.
- Comparison
- Compared with other EMS/ODMs, CLS is positioned more directly in the TPU and white-box switching chains.
- Risks
- Multi-source adoption, changes in customer vertical integration, and white-box competition may compress incremental share.
- Flex Ltd (FLEX)A beneficiary of CPU manufacturing, power systems, and AI deployment racks.
- Strengths
- FLEX remains involved in CPU manufacturing and has the highest exposure in power; FY26 power revenue was $2.1Bn, up 61%.
- Weaknesses
- TPU-related revenue may not grow as quickly as the broader ecosystem, and the market is concerned about share loss.
- Comparison
- Compared with CLS, FLEX has weaker direct TPU leverage, but more obvious leverage in power and rack businesses.
- Risks
- Changes in customer share, the pace of AI deployments, and whether power business growth materializes are the main uncertainties.
- Jabil (JBL)A beneficiary of test equipment, full-rack Trainium systems, NVDA switching equipment, and power business.
- Strengths
- JBL manufactures test equipment for major test hardware suppliers and entered the Trainium full-rack supply chain more meaningfully in mid-2025; power revenue is about $600M/year, up 30%+.
- Weaknesses
- Barclays believes JBL is not directly tied to TPU, with some of its benefits being more indirect.
- Comparison
- Compared with FN and CLS, JBL is more broadly distributed across test equipment, racks, and NVDA switching equipment.
- Risks
- If GPU, Trainium, and switching equipment ramps are delayed, related revenue growth may slow.
- Fabrinet (FN)A beneficiary of Trainium production and the NVDA optical transceiver supply chain.
- Strengths
- FN's ramp performance is considered strong, with new production lines and incremental business expected to continue driving revenue growth over the next one to two years; it is also an important supplier of NVDA transceivers, and 1.6T is expected to reaccelerate growth.
- Weaknesses
- It slightly missed expectations last quarter, and Trainium growth is smaller than TPU growth.
- Comparison
- Compared with EMS companies, FN benefits more specifically from optical communications and certain AI accelerator supply chains.
- Risks
- The scope of Trainium adoption, the timing of 1.6T volume ramp, and customer concentration are the main risks.
- Dell Technologies Inc. (DELL)A beneficiary of GPU servers and enterprise servers.
- Strengths
- Barclays believes DELL remains in a strong position in GPU servers, benefiting from SMCI issues and new capacity coming online in Texas; enterprise servers were also specifically highlighted in meeting feedback as performing well.
- Weaknesses
- Growth depends on continued improvement in demand for GPU servers and enterprise servers.
- Comparison
- Compared with supply chain component companies, DELL is more directly exposed to complete server demand and customer configuration changes.
- Risks
- Delays in GPU projects, competitors restoring supply, or a decline in server demand could affect growth.
- Arista Networks, Inc. (ANET)A beneficiary of front-end and back-end networking for AI clusters and front-end networking for cloud CPUs.
- Strengths
- Barclays believes ANET is well positioned in AMD cluster AI front-end and back-end networking, and the cloud CPU server inflection also benefits the front-end networking market.
- Weaknesses
- If white-box strategies accelerate among more cloud vendors, opportunities for branded equipment vendors may come under pressure.
- Comparison
- Compared with CSCO, ANET is described as the best-in-breed branded vendor, gaining more new customer activity.
- Risks
- White-box competition, the pace of cloud customer capex, and the adoption speed of scale-up Ethernet are key risks.
- Apple, Inc. (AAPL)An observation target for smartphone and premium consumer device demand.
- Strengths
- The report notes that iPhone sales in China continue to perform well, and some industry participants believe pricing and promotions by premium vendors are helping sustain momentum.
- Weaknesses
- Barclays questions the sustainability of this momentum, and overall smartphone unit expectations remain weak.
- Comparison
- Compared with the AI data center chain, the end-device chain in which AAPL operates is weaker.
- Risks
- Dependence on promotions in China, rising memory prices, and weakening premium Android demand may affect industry sentiment.
- Cisco Systems, Inc. (CSCO)One of the beneficiaries among branded networking vendors and new customer opportunities.
- Strengths
- The report says that against the backdrop of no obvious acceleration in white-box strategies among new cloud companies, CSCO can also see opportunities.
- Weaknesses
- Compared with ANET, the report's discussion of CSCO is more secondary, and its rating is Equal Weight.
- Comparison
- ANET is emphasized as the best-in-breed branded vendor, while CSCO is likewise a branded equipment vendor seeing opportunities.
- Risks
- Cloud customer white-box adoption, data center networking competition, and slower campus switching growth may limit upside.
Key data
- Report Date2026-05-18The date disclosed on the report cover page; the filename date is 2026-06-09.
- CLS TPU-Related Revenue$2.8Bn（2026E） vs $1Bn（2025）Barclays expects TPU-related revenue in 2026 to more than double.
- Trainium Unit Growth30%+The supply chain believes Trainium will see solid growth this year, though less than TPU.
- General-Purpose Cloud CPU DemandUnit growth of 20%-40%This is a clear improvement from discussions of flat demand six months ago, with higher ASPs as well.
- FLEX Power Revenue$2.1Bn FY26, up 61%The company expects nearly 2x growth in its cloud/AI business in FY27 and FY28, and Barclays believes it is gaining share in power.
- JBL Power Revenue~$600M/year, up 30%+Hanley's addition is expected to further strengthen this business.
- Full-Year PC Supply Chain ShipmentsDown 5%-10%ODMs expect a rebound later in Q2, but the full year is still expected to remain weak.
- Number of Companies Covered by Barclays1,851 companiesThe disclosure page shows Overweight accounts for 51%, Equal Weight 34%, and Underweight 14%.
Impact & implications
AI compute investment remains the main theme in the IT hardware and communications equipment chain. If the buildout pace of TPU, Trainium, GPU, and cloud CPU continues, server manufacturing, white-box switching, optical communications, power, and cooling suppliers will continue to benefit; if capacity, component shortages, or delays in customer in-house chip projects emerge, revenue recognition and market share changes may become volatile. Weak end-device demand implies that the divergence between the AI data center chain and the consumer electronics chain may continue to widen.
Risks
- Capacity constraints, component shortages, and changes in multi-source supply may affect revenue recognition and supplier market share.
- In-house accelerator projects beyond TPU and Trainium remain uncertain, and the commercialization timing and scale of MSFT Maia and META projects are still unclear.
- There are potential delays in NVDA GPU and AMD-related projects, although Barclays still expects a strong ramp by year-end.
- Rising memory prices have a greater impact on end devices such as PCs and smartphones, which may suppress profitability and demand in the consumer electronics chain.
- White-box switching competition, vertical integration by cloud customers, and new suppliers may weaken the share of certain branded or EMS companies.
- The report discloses that Barclays and its affiliates have investment banking, market making, liquidity provision, or other service relationships with some covered companies, and investors should be aware of potential conflicts of interest.
What to watch
- Whether plans to double TPU capacity and further increase it by about 50% in mid-2026 continue to materialize, as well as share changes for CLS and FLEX in the supply chain.
- Whether Trainium is adopted by more cloud vendors, and whether FN's new production lines and JBL's full-rack business can continue ramping volume.
- The year-end ramp pace of NVDA GPU and AMD AI clusters, and actual order conversion for DELL, CLS, FN, JBL, FLEX, and ANET.
- The adoption speed of scale-up Ethernet and 1.6T optical transceivers around 2027.
- Whether 20%-40% unit growth and higher ASPs in general-purpose cloud CPUs translate into revenue for EMS and networking equipment companies.
- Growth in FLEX and JBL power/cooling businesses, the contribution from Hanley integration, and incremental demand driven by higher per-rack power consumption.
- Whether a Q2 rebound appears in the PC supply chain, and whether the full-year decline expectation of 5%-10% improves.
- iPhone sales momentum in China and the sustainability of promotions, as well as whether weakening premium Android demand broadens.