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 3.7%, which is lower than 5.1% 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 U.S. 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 5.0 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 26.4% in 2023.
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