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2021/04/14
Enterprise demand for cloud services has been rising steady in the past two years owing to the rapidly changing global markets and uncertainties brought about by the COVID-19 pandemic TrendForce’s investigations find that most enterprises have been prioritizing cloud service adoption across applications ranging from AI to other emerging technologies as cloud services have relatively flexible costs Case in point, demand from clients in the hyperscale data center segment constituted more than 40% of total demand for servers in 4Q20, while this figure may potentially approach 45% for 2021 For 2021, TrendForce expects global server shipment to increase by more than 5% YoY and ODM Direct server shipment to increase by more than 15% YoY
Global server shipment for 2Q21 is expected to increase by 20% QoQ and remain unaffected by material shortage
Thanks to the accelerating pace of enterprise cloud migration and the long queue of unfulfilled server orders last year as a result of the pandemic, server ODMs will likely receive an increasing number of client orders throughout each quarter this year For instance, ODM vendors saw a 1% QoQ growth in L6 server barebones orders from their clients in 1Q21, but this growth is expected to reach 15-18% in 2Q21 TrendForce’s analysis indicates that apart from server ODMs maintaining a strong momentum, server OEMs (or server brands) will also be able to significantly raise their unit shipments in 2Q21 The quarterly total shipments from server OEMs for 2Q21 is currently projected to increase by 20% compared with 1Q21 that was the traditional off-season The COVID-19 pandemic is a major contributor to shipment growth because it has caused a paradigm shift in corporate work practices and spurred companies to accelerate their cloud migrations The effects of the pandemic have also provided a window of opportunity for the traditional server OEMs, including HPE and Dell, to develop new business models such as hybrid cloud solutions or colocation services that allow their customers to pay as they go, in addition to their existing sales of whole servers
It should be pointed out that, not only is the shortage of materials within the server supply chain as yet unresolved, but the long lead times for certain key components are also showing no signs of abating However, in response to the pandemic’s impact on the industry last year, server manufacturers have now transitioned to a more flexible procurement strategy by sourcing from two or three suppliers instead of a single supplier for a single component, as this diversification allows server manufacturers to mitigate the risk of potential supply chain disruptions TrendForce therefore believes that the current supply of key components including BMCs and PMICs is sufficient for server manufacturers, without any noticeable risk of supply chain disruptions in the short run
Huawei and Inspur maintain brisk server shipments due to favorable domestic governmental policies and demand from cloud service providers
China’s server demand, which accounted for about 272% of the global total in 1Q21, continues to grow annually Favorable policies and support from domestic cloud service providers are the main demand drivers in the country Shipments from domestic server OEMs have remained fairly robust in China on account of the build-out of the hyperscale data centers across the country Another reason is that Chinese telecom companies procure servers mostly from domestic manufacturers Taken together, these aforementioned factors directly contributed to the server shipments of Inspur and Huawei in 1Q21
Huawei’s server shipments are relatively unaffected by the US-China dispute, even though the sanctions enforced by the US government constrained Huawei’s component supply The demand for Huawei servers has been boosted by telecom tenders and procurement from domestic enterprise clients A QoQ growth rate of roughly 10% is projected for 2Q21 on account of a new round of government tenders As for the whole 2021, Huawei’s annual shipments are still forecasted to register a YoY growth rate of about 5% Thanks to infrastructure programs and rising orders from data centers, Inspur is expected to capture around 30% of China’s total server demand in 2021 On the matter of product strategy, Inspur already has a sizable ODM business with tier-1 Chinese cloud service providers (ie, Baidu, ByteDance, Alibaba, and Tencent) The volume of incoming orders for the first half of this year will also be quite massive because tier-2 cloud service providers and e-commerce platforms such as JDcom, Kuaishou, and Meituan will be injecting significant demand
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
2021/02/25
Since 3Q20, memory suppliers’ production capacities allocated to server DRAM have dropped to about 30% of the total DRAM production capacity, according to TrendForce’s latest investigations While this decrease took place as suppliers sought to increase the supply of other DRAM products in higher demand, it also represented an attempt for them to adjust the ASP of various DRAM products Furthermore, since the persistent demand for consumer electronics has shown no signs of slowing down in 1Q21, as of now suppliers have also been maintaining the same capacity allocation as last year However, given that second quarters have traditionally marked the cyclical upturn in server shipment, server DRAM demand is thus expected to ramp up in 2Q21, in turn prompting suppliers to raise their quotes for server DRAM TrendForce is therefore revising up the QoQ increase in server DRAM contract prices for 2Q21 from the original forecast of 8-13% to the adjusted forecast of 10-15%, with certain transactions potentially involving as much as a 20% price hike
Server DRAM contract prices are likely to increase by more than 40% throughout the year as demand is likely to persist through 3Q21
With regards to demand, after DRAM prices reached rock bottom at the end of last year, the oversupply situation in the market and the pressure on buyers to destock their inventory have both gradually stabilized by now As prices closed in on historically low levels, buyers became more and more active in their procurement activities In addition, data center demand for server DRAM is set to increase after 1Q21, driven by the increasing cloud migration needs of the post-pandemic “new normal” This demand will likely persist through 2H21, thereby injecting additional growth momentum into the overall server market
With regards to supply, on the other hand, DRAM suppliers will be relatively conservative in their capacity expansion efforts this year, with most suppliers having no plans to expand their capacities Also, the oligopolistic nature of the DRAM industry means suppliers generally prioritize profitability over other factors when allocating their production capacities Case in point, the rising popularity of WFH and distance education led suppliers to reallocate their production capacities last year More specifically, suppliers allocated their capacities to first fulfill the high demand from the smartphone and notebook computer markets in 3Q20 As a result, capacities allocated to server DRAM underwent a corresponding decline during this period
On the whole, TrendForce expects server DRAM contract prices to increase by about 8% QoQ in 1Q21 and by 3-4% MoM on average within the quarter Moreover, TrendForce also does not rule out the possibility that server DRAM contract prices may experience additional slight MoM increases past this period given that contract prices are negotiated on a quarterly basis Looking ahead, TrendForce indicates that server DRAM will remain in high demand through 3Q21, as geopolitical uncertainties and the shift of work life towards WFH continue to generate upward momentum for server shipment Therefore, server DRAM contract prices are expected to rise by more than 40% cumulatively from late 2020 to late 2021
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
2020/11/12
The COVID-19 pandemic has accelerated paradigm shifts in work, education, and living for people around the world since the early part of 2020, according to TrendForce’s latest investigations The proliferation of smart handheld devices has led to strong and consistent growth in the demand for cloud storage and computing Furthermore, the market penetration of cloud services has risen sharply as enterprises undertake digital transformation projects On the side of general consumers, there have been changes in online spending habits and advances in business models for e-commerce At the same time, a new generation of social media platforms has risen Thanks to these developments, cloud service providers (CSPs) are able to collect huge amounts of consumer data for developing a more diverse range of businesses As such, TrendForce’s latest survey of the global server market indicates that hyperscale servers already account for almost 40% of the total demand in 4Q20, and the number of hyperscale data centers is now three times of that in the 2012-2014 period
Looking ahead to 2021, Intel’s 10nm Ice Lake and AMD’s 7nm Milan platforms will both be released to market, potentially galvanizing a wave of server replacement demand from enterprise clients and additional server demand from data center clients’ infrastructure build-out On the other hand, the prevailing belief among market observers is that the new normal brought about by the pandemic will continue to generate demand for cloud services Furthermore, as international tensions introduce geopolitical uncertainties, the demand for small-scale data centers has also emerged as a response to these uncertainties In terms of fully assembled server units (L10), overall server unit shipment is projected to increase by about 6-7% next year, with the bulk of the growth momentum arising by way of data center demand in North America ODM Direct server shipment to these data centers is projected to increase by about 16-18% YoY
While the COVID-19 pandemic remains unpredictable, server OEMs may lower their yearly shipment in 2021
In light of the pandemic-generated market volatility, TrendForce analyst Mark Liu forecasts two possible scenarios for the server industry
Scenario One: Assuming the pandemic can be brought under control in 1H21, total server unit shipment is projected to increase by 5-6% YoY in 2021 Digital transformation efforts (paradigm shifts in work and everyday life) will provide some much-needed upward momentum for server demand from North American data centers to return to normal levels, thereby increasing ODM Direct server shipment by 12% YoY, a similar YoY growth compared to 2020 levels
Scenario Two: Alternatively, assuming that the pandemic becomes more severe from late 2020 to early 2021, the global economy will continue to sustain heavy losses, leading to greatly reduced investment momentum from enterprises In this scenario, overall server unit shipment is expected to increase by less than 4% YoY in 2021, and ODM Direct shipment is expected to increase by a mere 10% YoY owing to diminished server demand from North American data centers
Future outlook of the global economy remains unpredictable on the whole, as WFH and distance education become the new normal owing to the COVID-19 pandemic However, regardless of the economy’s future direction, TrendForce forecasts a double-digit YoY increase in ODM Direct server shipment for 2021 and expects overall server demand to maintain a positive growth trend going forward
2020/09/16
Due to server ODMs’ higher-than-expected inventory of server barebones in 3Q20, additional server orders from the ODMs’ clients came to a screeching halt, therefore resulting in a QoQ decrease in overall server orders for the quarter, according to TrendForce’s latest investigations As ODMs gradually destock their inventories of server barebones in 4Q20, data center operators are expected to step up their server procurement activities as well, albeit to a far lesser extent than 2Q20 However, given the excess inventory of server barebones, one to two quarters are needed to correct this situation, meaning ODMs will be unlikely to restart their procurement of server DRAM and server components until late 2020 or early 2021 In light of the fact that server manufacturers still hold a relatively high inventory of server DRAM, TrendForce is now forecasting a 13-18% QoQ decline in server DRAM prices for 4Q20
Momentum of ODM server shipment is expected to slightly improve in 4Q20, though shipment still falls short of 2Q20 figures
TrendForce’s demand analysis indicates that enterprises have massively cut down on their server procurement in light of market uncertainties brought about by the COVID-19 pandemic Most of these enterprises have also transitioned their infrastructure spending from CAPEX to OPEX, in turn suspending some of their existing server orders
Despite the recovery of labor back to normal levels at overseas ODM assembly sites at the end of June, server barebones production and server set (whole server) shipments for 3Q20 are expected to decline by 10% QoQ and 49% QoQ, respectively, thus falling short of previous forecasts Looking ahead to the fourth quarter, the shipment performance of server barebones is expected to benefit somewhat from data centers’ procurement efforts, while ODMs gradually destock their inventory of server barebones, but the resultant QoQ growth of server shipment in 4Q20 is projected to be lower than 2Q20 figures
Huawei’s server DRAM procurement ahead of time is unable to reverse the downswing of server DRAM prices, which is expected to further decline in 4Q20
DRAM suppliers have been entering the server DRAM market in droves owing to the fact that server DRAM is the most profitable product category out of all DRAM offerings As a result, the supply of server DRAM has been on a steady upswing However, server manufacturers have been slowing down their server production since 3Q20, leading to an excess inventory of server DRAM This, combined with their reluctance to source more server DRAM from suppliers due to an anticipated price drop, has led to an oversupply situation in the server DRAM market On the other hand, Huawei has been very aggressive in procuring memory products during the recent two weeks as it wants to extend its component inventories as far as it can before the latest export control rules imposed by the US government come into effect after mid-September Server DRAM modules are among the items that the Chinese technology conglomerate are stocking up on, and most of these upside orders have been directed to the major DRAM suppliers based in South Korea
Even so, the server DRAM segment is still experiencing significant oversupply, while the demand side is also affected by the fact that buyers including data centers are dealing with high inventory Therefore, contract prices of server DRAM products continue to descent to new lows Even though prices for 4Q20 contracts have yet to be finalized, the overall trend suggests that the decline in contract prices of 32GB server DRAM modules may likely widen to a QoQ drop of about 15% or more In view of the market situation, TrendForce has formally widened the forecast of QoQ decline in server DRAM prices to 13-18% compared with the earlier projection of 10-15%
2020/08/18
Many enterprises transitioned their CAPEX in server procurement to OPEX in managed cloud services in 1H20 in the face of economic and other uncertainties from the COVID-19 pandemic, according to TrendForce’s latest investigations These enterprises have subsequently slowed down their server procurement orders, in turn resulting in enterprise server suppliers, led by Dell and HPE, to revise down their yearly shipment targets starting in 3Q20 TrendForce has thereby also revised the forecasted 08% QoQ decline in 3Q20 server shipment down to 49%
Server OEMs are actively adjusting their operating strategies in response to looming trend of enterprise cloud adoption
TrendForce indicates that the shipment performances of the enterprise server OEMs made an expected rebound in 2Q20 after the cyclical downturn of 1Q20 Although third quarters are traditionally peak seasons, the pandemic has induced enterprises to lower their CAPEX this year, with a noticeable lack of growth momentum in the server market, thus resulting in QoQ declines in server shipments across the board in 3Q20 Major server OEMs, including Dell, HPE, Huawei, and Inspur, are expected to each show a near-double digit QoQ decrease in server shipment
In terms of the individual server OEMs’ strategies this year, Dell’s transfer of high-grossing production lines to Taiwan and aggressive expansion of cloud service clientele (such as financial institutions and small-scale CSPs) are projected to maintain Dell’s competitive advantage as enterprises transition into cloud solutions Its subsidiary EMC meanwhile remains the best-of-breed solutions provider in the enterprise cloud storage market But the general trend for enterprises worldwide to lower their CAPEX in response to the pandemic is projected to impact Dell’s shipment performance in 2H20
HPE shifted nearly 10% of its server offerings to AMD’s Rome platform in 1H20, but it encountered certain challenges during the early stages of this transition because most of its clients were still on Intel’s platform HPE therefore performed below expectations in the first two quarters of the year Furthermore, as the company’s production lines were affected by the pandemic in 1H20, the ensuing labor shortage at assembly plants meant many server barebones could not be assembled into full systems HPE is therefore likely to register a QoQ decline in server shipment in 3Q20 due to excess inventory of server barebones and lowered volume of orders from existing enterprise clients
Thanks to increasing orders for data center assembly from North American clients, Lenovo’s performance in 3Q20 appears remarkable, as the company’s production lines were immediately taken up by server assembly orders from Microsoft Lenovo is the only manufacturer among the top five server OEMs to record a growth in server shipment in 3Q20 against the overall downtrend
Stagnant penetration rate of Chinese-made servers is linked with the status of new infrastructure development in China
With regards to the Chinese market, the fact that most hyperscale data centers and CSPs based in China opt for servers made by Chinese manufacturers drove up server shipments from Inspur and Huawei However, under the influence of the economic downturn in 3Q20, infrastructure build-out in China has not taken place on schedule, leading to lower than expected levels of server procurement by enterprise clients compared to forecasts made in early 2020 As such, Inspur and Huawei are likely to face imminent declines in server shipment as well
