Advanced Computing in the Age of AI|Tuesday, August 11, 2020
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Server Market Gets a Hefty COVID Boost 

The global server market extended its rally into the first quarter of 2020 as the pandemic-prompted global lockdown boosted enterprise reliance on cloud services.

Surging demand for hyperscale cloud services as work-from-home requirements kicked in boosted global server shipments during the first quarter to more than 3.3 million units, market tracker Omdia reported this week. That’s an increase of nearly 1 million over the same quarter last year, driven by record server shipments in March 2020.

Those results build on fourth quarter 2019 results that included a whopping 27 percent increase in server deliveries, Omdia said Wednesday (May 6). Among the beneficiaries of the workforce paradigm shift were white box server vendors, so-called because equipment is not manufactured by brand-name vendors.

White box server sales alone jumped 18.7 percent during the fourth quarter of 2019, approaching $4.3 billion. That total pushed the white box vendors ahead of perennial server leaders Dell EMC (NYSE: DELL) and Hewlett Packard Enterprise NYSE: HPE), both also registered doubled-digit sales growth during 4Q 2019.

With COVID-19 spreading, Omdia revised downward it 2020 server forecast by 770,000 units as global supply chain disruptions emerged. The expectation was that work shortages in China would reduce manufacturing output in February and into March. Those disruptions were overcome, however, resulting in record server shipments in March.

“We now have multiple indicators that the start to 2020—and likely the entire first half of the year—will see the server market grow double digits over 2019,” said Vlad Galabov, Omdia’s datacenter analyst.

“However, it’s important to avoid underestimating how much the server market could be impacted by the looming global recession.”

Galabov predicted public and private sector server orders could be cut during the second half of 2020 as IT budgets tighten. “Despite vendors and distributors successfully managing the supply chain challenges in the first quarter of the year, Omdia continues to receive reports of strain and shortages in components globally,” Galabov added.

Projected declines in enterprise server purchases could be offset by surging demand by cloud service providers as they pivot toward home-office and mobile workforces.

Those business model shifts are expected to “permanently” accelerate demand for datacenter computing resources. Sustained demand would likely continue to benefit white box vendors such as Chinese manufacturing giants Foxconn and QCT. By the end of 2019, they were followed by Dell EMC and HPE. Dell’s 4Q 2019 server revenues totaled $3.9 billion; HPE server revenues declined 9 percent year-on-year to $3.4 billion.

In March, Gartner Inc. reported a 5.1 percent increase in global server revenues during the fourth quarter of 2019 while shipments increased 11.7 percent. For the full year, Gartner reported server shipments declined 3.1 percent, as did revenues by 2.5 percent.

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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