According to TrendForce research, observing recent server market dynamics, ODM’s prior production plans have begun to gradually cool. Since the material mismatch cycle has improved significantly, server motherboard suppliers' stocking momentum began falling off in 2Q22. At the same time, pandemic lockdowns in Shanghai have impacted the production of some ODMs. Particularly, enterprise orders led by Inventec have borne the brunt. Production plans including those of Dell and HPE have been significantly delayed but overall shipment performance will not be affected in the short term. Global server shipments are still forecast to grow by 6.5% QoQ in 3Q22, mainly due to continued support from demand generated by companies accelerating cloud migration post-pandemic.
TrendForce indicates that there is currently no sign of the four major North American CSPs reducing server order volume. However, since the advent of the pandemic, the industry has faced supply chain issues and the server side has continued to be affected by a limited supply of scarce materials. In order to achieve production goals, buyers have increased their orders and raised their material inventories as a bulwark against shortages causing an inability to ship whole devices. This prompted data centers, OEM clients, and ODMs of all sizes to increase order volume estimates, resulting in a surplus of orders in the server market. Therefore, TrendForce does not rule out the possibility of subsequent order adjustments by CSP players, which will lead to a slight downward revision in server shipments in 2022.
In addition to the potential quandary of impending order adjustments foreshadowed by the overall market, server demand in the Chinese market is characterized by additional policy-related factors. TrendForce indicates, since the implementation of the Chinese government's policy on energy consumption and Internet business in 2021, first-tier Internet service providers in mainland China have begun to adjust their server stocking plans in 2022. Up until now, Baidu, Alibaba, and Tencent have all lowered their procurement scale this year, with Tencent downgrading its purchasing in the most obvious fashion. In addition, the three major BAT giants will be more reserved in terms of future cloud construction. It is worth mentioning that among the four major CSP players in China, only ByteDance has grown this year despite prevailing trends. ByteDance reduces the negative impact of domestic policies in China by actively expanding its e-commerce platform that combines its overseas TikTok business and new businesses. ByteDance will still maintain an annual growth rate of nearly 70% in server purchases in 2022.
However, a project to shift computing resources westward on the domestic front proposed by the Chinese government is driving the construction of forward-looking servers and began priming the cloud business of telecom operators in 2Q22. TrendForce observed, in addition to China Mobile, which previously displayed strong momentum, starting to gradually increase order volume, China Telecom and China Unicom have also generally increased the scale of their server tenders, and such momentum has been evenly distributed among OEMs in mainland China. Therefore, despite the slowdown in the purchasing power of China's first-tier CSP players, the deployment of provincial government servers and the construction of telecommunications companies supported by state-owned assets have formed a demand backstop for China's server market this year.
Global server market will maintain positive growth in 2022, shipments expected to grow by 5% annually
TrendForce believes, the demand side of the global server market has grown significantly in the past two years due to the impact of the pandemic but the pandemic has also caused chaos in the supply chain and logistics, causing uncertainty in industry development. Although server demand in 2H22 is subject to downside risks due to the consequences of material mismatches, the annual growth rate of server shipments for the entire year can still reach approximately 5%. Instead, it may be affected by inventory adjustments and overall economic downturn in 2023. IT capital investment is likely to slow and growth will not be as strong as in the past two years.
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The Webinar, ”COMPUFORUM 2022 Webinar: Diverse Market Opportunities Generated by Applications of Cyber-Physical Systems” will start from June 15, 2022. The TrendForce research team including Mark Liu, Caron Ju, Bryan Ao, and Alex Chen will present speeches regarding memory, servers, and datacenters, respectively.