News & Insights for the AI Journey|Monday, August 19, 2019
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Few Bright Spots in Struggling Server Market 

The global server market continued to slow during the first quarter of 2016 as revenues declined while shipments rose only modestly, indicating that average selling prices continue to slip. Meanwhile, hyper-scale datacenter deployments continue to spur modest increases in server shipments.

Market tracker Gartner Inc. (NYSE: IT) reported on Thursday (June 2) that worldwide server revenues declined 2.3 percent in the first three months of this year despite a 1.7 percent year-on-year increase in shipments. Among the top five server makers, only Hewlett Packard Enterprise (NYSE: HPE) recorded growth in server revenue, up 3.3 percent.

Server shipments and revenue declined across all regions except Asia, where the Chinese server market remains relatively strong. That's good news for the most recent entrant in the server market, Lenovo (HKG: 0992), which acquired IBM's (NYSE: IBM) server business last year and has acknowledged it must grow the Asian server market.

Despite selling off much of its commodity server business to Lenovo, IBM still ranks third in global server revenues behind market leader HPE and Dell. Gartner said HPE still claims nearly one-quarter of the global server market while Dell held steady on an annual basis with a roughly 17 percent market share.

Gartner estimates that more than 2.7 million servers were shipped during the first quarter, slightly higher than the same time last year. While the number of machines shipped by market leaders HPE, Dell and Lenovo (in that order) declined on an annual basis, Chinese telecommunications giant Huawei Technologies registered a whopping 23 percent year-on-year increase in server shipments. That total likely accounts for the 9.7 percent revenue increase in Asia along with an 8.4 percent jump in Asian shipments compared to the same quarter last year.

Another Chinese server manufacturer, Inspur, also recorded strong growth during the first quarter of this year, Gartner reported.

Chinese technology vendors like Huawei are increasingly found in the ranks of an expanding number of open source infrastructure projects designed to shape industry standards and spur technology development. While these efforts often yield new tools that are made widely available, emerging players like Huawei also have determined that these industry initiatives represent what market watchers note is a form of "enlightened self-interest."

"The real driver of global growth continues to be the hyper-scale datacenter segment," Gartner analyst Jeffrey Hewitt noted in a statement releasing the quarterly estimate. "The enterprise and small or mid-size business segments remain relatively flat as end users in these segments accommodated their increased application requirements through virtualization and considered cloud alternatives."

Meanwhile, weaker server shipments to Europe and surrounding regions are setting the stage for "another challenging year," Gartner forecast.

Looking ahead, the market watcher said server shipments during the second quarter of this year should be slightly better than the first three months. Nevertheless, weakness across Europe and Russia are expected to weigh down the market along with consolidation pressures stemming from virtualization and cloud adoption.

 

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).

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