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2023/01/31
Facing global economic headwinds, the four major North American cloud service providers (CSPs) have scaled back their server procurement quantities for 2023 and could make further downward corrections in the future Meta is the leader among the four in terms of server demand reduction, followed by Microsoft, Google, and AWS TrendForce has lowered the YoY growth rate of their total server procurement quantity for this year from the original projection of 69% to the latest projection of 44% With CSPs cutting demand, global server shipments are now estimated to grow by just 187% YoY for 2023 Regarding the server DRAM market, prices there are estimated to drop by around 20~25% QoQ for 1Q23 as CSPs’ downward corrections exacerbate the oversupply situation
Looking at the four CSPs individually, the YoY decline of Meta’s server procurement quantity has been widened to 30% and could get larger The instability of the global economy remains the largest variable for all CSPs Besides this, Meta has also encountered a notable obstacle in expanding its operation in Europe Specifically, its data center in Denmark has not met the regional standard for emissions This issue is expected to hinder its progress in setting up additional data centers across the EU Moreover, businesses related to e-commerce account for about 98% of Meta’s revenue Therefore, the decline in e-commerce activities amidst the recent easing of the COVID-19 pandemic has impacted Meta’s growth momentum Additionally, Meta’s server demand has been affected by the high level of component inventory held by server ODMs
Turning to Microsoft, its server procurement quantity for this year will still register a double-digit growth rate because it has not significantly curbed its demand related to enterprise cloud investments However, the growth rate has been lowered to 134% from the previous projection of 169% TrendForce is not ruling out a further downward correction in the future because the recent wave of corporate downsizing that is felt across many sectors could affect Microsoft’s revenue from SaaS Furthermore, as companies cut spending due to the uncertain economic outlook, Microsoft could see limited growth for its cloud-related revenues (eg, revenues from IaaS and PaaS) On the top of all these, inventory reduction is proceeding at a slower-than-expected pace in the server supply chain Therefore, production has been scaled down for servers that run on the Gen 9 platforms (ie, Intel’s Sapphire Rapids, AMD’s Genoa, and Ampere’s Siryn)
Looking at Google, the projected YoY growth rate of its server procurement quantity for 2023 has been lowered to 52% Google’s server procurement plan could still be affected by two factors First, new servers running on Intel’s Sapphire Rapids or AMD’s Genoa have not met Google’s expectations in terms of total cost of ownership This could lead to a shrinkage of Google’s server demand for 2H23 Second, the slump in the e-commerce market during this post-pandemic period is limiting the growth of Google’s revenue from cloud services Hence, Google could scale down its server deployment plan
Lastly, regarding AWS, its orders for components such as CPUs, connectors, and CCLs have been affected by the recent performance of the wider economy On the whole, AWS has shrunk the scale of its component orders by about 30% from last year Therefore, the YoY growth rate of its server procurement quantity for this year has also been corrected down to 62% Two factors could lead to a further revision to its demand First, most its servers that run on its in-house Graviton CPUs are being used to provide services to its clients in the enterprise market If these clients cut their demand this year, AWS will also make a corresponding adjustment to its demand for Graviton servers Second, AWS originally planned to begin the mass production of servers that run on the Graviton 3 platform in 3Q23, but there are now indications of an immediate migration to the new Graviton 4 platform If AWS has formally decided to replace the models that run on the Graviton 3 with the ones that run on the Graviton 4, then the contribution from the servers with the more advanced platform will arrive too late to be reflected in the server shipment figure for this year
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
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2023/01/09
TrendForce’s latest analysis of the DRAM market finds that the inventory pressure on suppliers remain significant due to the persistently weak demand for consumer electronics Among the top three DRAM suppliers, only Samsung has seen a slight drop in inventory level thanks to its highly competitive pricing strategy To prevent DRAM prices as a whole from making another sharp dive, a few suppliers such as Micron have been cutting production Therefore, the QoQ decline in DRAM prices are projected to shrink to around 13~18% for 1Q23 However, the slump will have yet to reach the bottom at that time Regarding the QoQ changes in the prices of the major categories of DRAM products for 1Q23, PC DRAM and server DRAM are projected to again register a drop that is near 20% Conversely, mobile DRAM will experience the smallest price decline because its profit margin is ready the thinnest
In the PC DRAM segment, PC OEMs have lowered procurement quantity for two consecutive quarters as sales of notebook (laptop) computers have been lackluster Now, moving into 1Q23, PC OEMs hold around 9~13 weeks of PC DRAM inventory Even though they are working hard to consume the existing stock, the traditional low season acts a powerful constraint The overall PC DRAM bit output is expected to fall during 1Q23 because Micron has already made a marginal cut to its PC DRAM production, and SK Hynix will soon follow suit However, supply glut will still be significant in the PC DRAM segment The top three suppliers have been aggressive in lowering prices for DDR5 products, so the DDR5 penetration rate in the PC DRAM segment is projected to reach almost 20% in 1Q23 Regarding QoQ changes in PC DRAM prices for 1Q23, DDR5 products will experience a drop of around 18~23%, and DDR4 products will experience a drop of around 15~20% The ASP of PC DRAM products is projected to fall by around 15~20% QoQ for 1Q23
Turning to the server DRAM segment, server demand is going to fall during 1Q23 because of the effects of the traditional low season, inventory adjustments, and the recent weakening of the global economy North American cloud service providers have already started to dial down server demand in terms of procurement quantity and the pace of server deployment However, suppliers continue to raise the share of server DRAM in production, so this segment continues to face mounting inventory pressure While some suppliers are cutting production, this is not enough to effectively limit the decline in server DRAM prices Regarding QoQ changes in server DRAM prices for 1Q23, DDR5 products are expected to suffer a decline of 18~23%, which is slightly larger compared with the projected drop experienced by DDR4 products for the same period However, the DDR5 penetration rate in the server DRAM segment is projected to reach just around 10% in 1Q23 Thus, DDR4 products are going to determine the extent of the general decline Currently, the ASP of server DRAM products is projected to fall by around 15~20% QoQ for 1Q23
The mobile DRAM segment has benefited from about six quarters of inventory adjustments on the part of smartphone brands Currently, smartphone brands hold 5~7 weeks of mobile DRAM inventory on average, so the inventory situation is fairly optimal On the other hand, smartphone sales have been in a slump A rebound is not expected in the short term, especially after the latest change in China’s policy on controlling COVID-19 outbreaks With smartphone brands lowering their device sales targets for 2023, there will be a certain degree of difficulty when it comes to inventory consumption in the mobile DRAM segment However, mobile DRAM quotes are starting to show a more moderate decline than before because suppliers have scaled back production, and the effect of this will become more prominent over time Moreover, mobile DRAM already has the lowest profit margin compared with other categories of DRAM products Since the market consensus is that the demand for mobile DRAM products will remain weak, slashing prices further will do little in helping suppliers to capture more market share Hence, TrendForce projects that the QoQ decline in mobile DRAM prices will narrow to around 10~15% for 1Q23
With regard to the graphics DRAM segment, shipments are going to ramp up for graphics cards and notebook computers featuring the latest GPUs However, the overall demand for consumer electronics is sluggish, and the previous period for inventory adjustments was quite long Therefore, graphics DRAM buyers maintains a cautious procurement strategy Furthermore, demand growth still lagged behind supply growth in graphics DRAM segment during 4Q22, so inventory continues to pile up for this product category on the supply side Additionally, for the specifications of the mainstream graphics DRAM solutions, there will be a full-scale shift in buyers’ demand from GDDR6 8Gb to GDDR6 16Gb during 2023 With the demand for them becoming more limited, graphics DRAM products based on GDDR6 8Gb will experience more dramatic price fluctuations TrendForce currently projects that the ASP of graphics DRAM products will fall by about 18~23% QoQ for 1Q23, but the decline could get larger if suppliers continue to undercut each other in this segment
Lastly, in the consumer DRAM segment, prices have yet to leave the downturn phase as there are no signs of buyers ramping up procurement activities Also, the flow of consumer DRAM orders related to networking devices was steady before but has now started to gradually decelerate this first quarter Due to these developments, shipments of consumer DRAM products on the whole are going to slide Even though Micron began to cut production in November last year, suppliers’ DRAM inventories have been climbing to new heights This segment will continue to experience excess supply unless suppliers undergo several quarters of inventory adjustments and make larger production cuts TrendForce projects that the ASP of consumer DRAM products will fall by 18~23% QoQ for 1Q23 as supply glut persists in this segment
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
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2022/11/22
Based on the latest data and research, TrendForce has further corrected down the projected YoY growth rate of whole server shipments for 2023 to 28% Three factors are behind this revision First, lead time has started to return to its usual length for most orders related to server components from 3Q23 onward Seeing this, server OEMs and cloud service providers (CSPs) have also begun to correct the component mismatch issue by lowering demand for items that are in excess while maintaining a constant inventory level for items that are still in tight supply This development, in turn, has reduced the flow of server orders going to ODMs Second, the wave of demand that was generated earlier from the effects of the COVID-19 pandemic is dissipating Hence, expansion activities have cooled off noticeably for services such as video streaming, e-commerce, etc Among CSPs, Meta, Google, and ByteDance (TikTok) have lowered their server procurement quantities for next year Lastly, the global economic outlook has remained fairly negative, so companies across most industry sectors have formulated a more conservative expenditure plan and scaled back IT-related spending for next year
QoQ Declines in Prices of Server DRAM Modules and Enterprise SSDs for 4Q22 Have Widened to 23~28% as Competition Among Suppliers Intensifies
In the server DRAM market, DRAM suppliers are facing greater difficulties in raising sales because buyers have been carrying a high level of inventory during the second half of this year In 3Q22, suppliers did manage to get some buyers to lock in the price for that quarter and the next However, TrendForce believes that further downward corrections to next year’s server shipments have ratcheted up the price competition among suppliers Moving into October, CSPs received even lower server DRAM quotes as suppliers proposed to lock in the price to the end of 1H23 Now, in November, another round of negotiations for “fourth-quarter special deals” has also commenced Due to these developments, QoQ declines in contract prices of server DRAM modules for 4Q22 have enlarged to 23~28%
Regarding the enterprise SSD market, orders remained relatively stable for a while However, the increasingly conservative economic outlook and the downward revisions to corporate capital expenditure plans in 2H22 have led to softer demand momentum for enterprise SSDs Moreover, NAND Flash suppliers face rising inventory for enterprise SSDs as the demand for consumer electronics has plummeted Internally, they have been under pressure to find solutions for consuming excess production capacity and meeting their year-end targets Externally, they need to prepare for headwinds such the expected weak demand situation during the low season of 1Q23 and delays in the production ramp-up of Intel’s and AMD’s new server CPU platforms Given these factors, suppliers are compelled to offer larger price concessions on enterprise SSDs even though the contracts for this fourth quarter have already been arranged Due to the new wave of negotiation activities, QoQ declines in contract prices of enterprise SSDs have exceeded the earlier estimation and now come to 23~28% as well
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
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2022/11/01
According to the latest TrendForce research, the mass production schedule of new Sapphire Rapids products has been delayed due to the poor yield rate of the Intel 7 process At present, the production yield rate of Sapphire Rapids is estimated at only 50~60%, which affects mainstream Sapphire Rapids MCC products The company’s mass production planning has been deferred from 4Q22 to 1H23 This delay in the mass production schedule not only affects the ODM material preparation cycle, but also greatly reduces the proportion of OEMs and CSPs introducing Sapphire Rapids this year AMD will be the biggest beneficiary We estimate the market share of AMD x86 server CPU to be approximately 15% in 2022 and rise to 22% in 2023
AMD has been seeing greatly improved capacity of ABF since 2H21 At the same time, more and more end customers have escalated requirements for energy consumption reduction Considering the total cost of the server (TCO), they have begun to favor single-socket servers TrendForce believes that the change in customer demand will enable AMD to break through the bottleneck created by a 2-socket solution, boosting the company’s overall shipments
In addition to weak demand in the general environment, Intel is also facing continual shortages of low-end FPGA, which affects its dual-socket CPU orders, as well as facing pressure such as weakening demand in terms of government tenders and inventory control policies at OEMs In addition, the high-end computing chip market has borne the brunt of the recent ban imposed by the US Department of Commerce and shipments of customized chips from Intel and AMD are indeed under pressure If the conflict between China and the United States intensifies in the future, Intel's dominance in the server CPU market may be a double-edged sword, implying a more serious impact than AMD
ESG is included in corporate procurement indicators, driving demand for single-socket servers
Intel's new product mass production schedule has been delayed It can be seen from ODM orders that major CSPs have increased their reliance on AMD Since the overall server cost of AMD Milan is lower than that of Intel Ice Lake, AMD Milan features better RDIMM scalability and number of SSD channels Unlike Intel's standard dual-socket design, AMD can achieve the performance required by customers as well as effectively helping customers save more capital expenditure
In the short term, the market share of Intel x86 server CPU shipments has dropped by nearly 6% in the past two quarters compared with the same period last year, primarily due to a significant migration of orders from US-based CSPs Among these orders, AMD Milan-X shipments stimulated stocking momentum from US-based CSPs such as Microsoft and Meta Furthermore, supply of Lattice CPLDs required by 2-socket servers with Intel CPUs remains tight and customers are also switching to AMD due to concerns regarding supply In the long run, as corporations and governments successively included ESG indicators into their procurement considerations, energy conservation performance will become key in procurement decisions Therefore, TrendForce believes that AMD will see rapid growth in 2023 The market share of AMD x86 server CPU shipments is estimated to reach 25% in 4Q23, with an annual increase of 7% in 2023
2022/10/18
According to the latest TrendForce research, pandemic-induced materials shortages abated in the second half of this year and the supply and delivery of short-term materials has recovered significantly However, assuming materials supply is secure and demand can be met, the annual growth rate of server shipments in 2023 is estimated to be only 37%, which is lower than 51% in 2022
TrendForce indicates that this growth slowdown is due to three factors First, once material mismatch issues had eased, buyers began adjusting previously placed purchase order overruns Thus, ODM orders also decreased but this will not affect the 2022 shipment volume of whole servers for the time being Second, due to the impact of rising inflation and weakness in the overall economy, corporate capital investment may trend more conservative and IT-related investment will emphasize flexibility, such as the replacement of certain server terminals with cloud services Third, geopolitical changes will drive the continuing emergence of demand for small-scale data centers and previous construction of hyperscale data centers will slow The recent ban on military/HPC servers issued by the US Department of Commerce on October 7 has a very low market share in terms of its application category, so the impact on the overall server market is limited at present However, if the scope of the ban is expanded further in the future, it will herald a more significant slowdown risk for China's server shipment momentum in 2023
From the perspective of whole device server DRAM content, since buyers will introduce new CPUs, Intel Sapphire Rapids and AMD Genoa, in 2023 and the cost of DDR5 DRAM is 30~40% higher than that of DDR4, the combination of CPU, Memory, and relevant new server model components will increase costs significantly As server terminal demand considerations will focus more on hardware costs, average installed whole device DRAM content will be limited Therefore, average annual content of server DRAM in 2023 is estimated to increase by only 7%, which is the first time this figure has fallen below 10% since 2016
If server DRAM prices continue making sharp corrections, average installed content expected to grow further in 2023
However, it is still possible that average server DRAM content will increase to 12% in 2023 because, in terms of server DRAM pricing in 2022, the prices received by Tier 1 customers in 3Q22 fell past a record low and this downward price trend will continue in 2023 If manufacturers are also willing to issue a larger price discount for high-content 64GB modules, this will have an opportunity to stimulate an increase in buyer purchasing power This situation will prompt some server applications to increase installed whole device DRAM content with services exhibiting the greatest demand for DRAM such as video streaming, public cloud, and private cloud increasing their installed content of server DRAM
In terms of the average content of enterprise SSDs, as the 4Q22 price drop expands to 15-20% and easing oversupply in 2023 will remain difficult, quotations may continue to face corrections However, since the price of NAND Flash is more flexible than that of DRAM, price reduction will stimulate an increase in whole device installed content In addition, next-generation CPU platforms support PCIe 50 transmission and the manifold increase of transmission speed will also contribute to the growth of average installed content The annual growth rate of average enterprise SSD content is estimated to increase to 264% in 2023
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
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
