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.