The server industry analysis by the DRAMeXchange research division of TrendForce thus far finds that frontline personnel of Chinese server manufacturers will return to work starting from 2/10, while other personnel resumed work on 2/3. Certain Chinese manufacturers resumed operations on 2/3 with government approval. On the whole, the server supply chain recovery has been progressing better than expected. Server manufacturers have traditionally increased capacity and stocked key components up to one month before the Chinese New Year to facilitate smooth shipment after the holidays. As such, major ODMs believe that the coronavirus outbreak will have minimal impact on server shipment in the short term despite the delay in work resumption. If work resumption on 2/10 cannot properly proceed, ODMs will increase their future production correspondingly.
According to Mark Liu, senior analyst at TrendForce, because most manufacturers have shifted their production lines to other regions such as Taiwan, the outbreak will have minimal impact on order fulfillment for U.S.-based data center operators. Orders for Chinese operators, such as Inspur and Huawei, depend on the extent of disease control, but are projected to have limited impact in the short term. Overall, server shipment will not drastically change this year, but the most concerning aspect of the overall server industry remains the upstream supply of PCB, the production of which is relatively labor-intensive. Therefore, it is imperative to continue monitoring the status of work resumption on production capacity. However, server manufacturers have already stocked PCB in reserve, meaning there will unlikely be a shortage of PCB in the short term.
Server demand in China this year depends heavily on orders placed by telecom operators and internet data centers. Remarkably, orders for 5G infrastructure servers have not been slashed by the coronavirus outbreak, with only a small number of orders being deferred. As the primary suppliers of 5G infrastructure servers in China this year, both Huawei and ZTE have filed applications for early work resumption. Chinese telecom operators are likely to fulfill their 2020 demands – projected to grow 120% YoY, reaching 300,000 units – on schedule.
An analysis of data center demand in China shows certain tech companies, such as Tencent and ByteDance, have ironically benefitted from the outbreak. Many of Tencent’s academic and corporate clients are turning to distance education and telework, respectively, in turn raising Tencent’s server demand. The company’s total yearly server demand is expected to reach 330,000 units this year, with a 20% increase YoY in orders placed. On the other hand, the rising popularity of short-form videos in China, combined with a successful overseas expansion effort, means increased server orders placed by ByteDance, whose server demand will exceed the demand forecasts of Alibaba Cloud and Baidu individually. ByteDance’s total yearly server demand is expected to reach 250,000 units this year.
To summarize, TrendForce believes the coronavirus outbreak will have limited impact on server supply. The only noteworthy factor is the possible postponement of upstream PCB supply, which may affect the production schedule of server manufacturers in the upcoming months. Server demand is expected to see growths this year owing to increases in telecom operators’ orders and in applications of distance education. As well, increased bandwidth consumption will drive demand for data center servers.