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Press Releases
3Q20 Server Orders to Face Adjustments in Light of Relatively High Server Barebones Inventory, Says TrendForce

2020/06/22

Semiconductors

According to the latest investigations by the DRAMeXchange research division of TrendForce, the increase in server orders in 2Q20 took place due to the gradual easing of supply chain disruptions from the COVID-19 pandemic ODM server orders increased by about 20% QoQ in 2Q20, although work resumption at some overseas server assembly lines yet remains lower than expected, in turn constraining the overall server unit shipment performance TrendForce estimates the QoQ increase in server shipments in 2Q20 to be about 9% TrendForce Senior Analyst Mark Liu indicates that North American and Chinese cloud service providers are still the dominant drivers in the server market Server demand in 1H20 has primarily benefitted from applications in the pandemic-driven stay-at-home economy, such as teleconferencing and media streaming However, as the inventory of ODM server barebones accumulates in 3Q20, CSPs are projected to abate their server orders; server unit shipments are thus expected to either hold flat in 3Q20 or undergo a slight QoQ dip Looking at 2020 in its entirety, the data center server demand from CSPs is projected to lead to a YoY growth of around 5% in global server shipments Google (GCP) GCP has conservatized its ODM server orders to mitigate risks related to supply chain disruptions caused by the pandemic in 2Q20 As such, GCP’s demand has slowed down considerably during 2Q20 Following a quarter of adjustments, issues regarding labor and materials at server assembly lines, in addition to supply chain disruptions, have mostly been resolved Server unit shipments to GCP are therefore likely to ramp up in 3Q20 GCP’s yearly server demand in 2020 will be driven by software optimization and the overall trend for servers to be manufactured to client-specific specs Server orders from GCP are likely to grow by almost 20% YoY in 2020 Microsoft (Azure Cloud) Due to pandemic-induced delays in server component deliveries as well as pressure from the unfinished recovery of labor and logistics, server shipments to Microsoft grew by about 10-15% QoQ in 2Q20, slightly below expectations Even so, Microsoft’s yearly ODM server demand is expected to show a significant YoY growth in 2020, driven by demand from applications such as infrastructure build-out and digital transformation initiatives, which include, more specifically, its existing Office software business and enterprise cloud solutions Increased teleconference software demand, driven by the pandemic, is also accelerating the transformation of Microsoft’s business model, in turn escalating its purchasing demand for servers Facebook In spite of the pandemic’s impact on the progress of Facebook’s data center construction, its server supply chain issues are expected to be substantially addressed in 3Q20, with a reduction of server barebones inventory accumulated in 1H20 Server shipments to Facebook are projected to decline by a slight 2-3% QoQ in 3Q20, but the company’s overall operations will remain robust Facebook has been focusing its infrastructure planning in Asia-Pacific from the end of last year to 1H20 Apart from renovating its North American data centers with new servers, Facebook is also ramping up its data center and e-commerce expansion in Asia In 2H20, the schedule of server shipments to Facebook’s data centers in Europe will depend on the overall environment Facebook is expected to increase its server orders by up to 10% YoY this year Amazon (AWS) AWS has a more diverse supply chain compared with other CSPs and depends on system integrators to assemble the whole servers that it uses Quarterly shipments from ODMs to AWS are estimated to grow by 15% QoQ for 2Q20 The global activities of AWS indicate that its new self-build data centers in Asia-Pacific and its colocation demand are spurring server shipments As companies in Asia-Pacific are accelerating the course of their enterprise digital transformation, the demand generated by their cloud migrations will be the main driving force behind the digital infrastructure build-out in the region BAT (ByteDance/Alibaba/Tencent) Because China was first to experience the outbreak of COVID-19, the Chinese market saw a rapid and massive expansion of upside demand related to the adoption of telecommuting and the growth of the stay-at-home economy, thus causing the server demand from Tencent to surge by 30% YoY in 1Q20, which subsequently slowed down in 2Q20, since some of Tencent’s demand had already been pulled forward Tencent is likely to restart its server procurement in 2H20 in order to adjust the run rate of its servers following the resumption of normal businesses across China Alibaba’s cloud and e-commerce businesses, as well as replacement of older servers, boosted the company’s server demand, which increased by about 10-20% YoY, in 2Q20 But Alibaba’s server demand in 2H20 is expected to decelerate to some extent Regarding ByteDance’s infrastructure strategy, ByteDance is working with GDS (Global Data Solutions Limited) for the build-out of data centers in China It has also significantly increased the number of overseas service points Nearly one-third of its servers are now located in North America to ensure the smooth expansion of TikTok’s activities in that region TrendForce’s latest webinar, Compuforum 2020: Supply Chain Impacts and Challenges in the Post-COVID Era, will be available for viewing starting on Wednesday, July 8, 2020 TrendForce’s analysts specializing in the memory industry will provide detailed analyses of the pandemic’s effects on the industry’s supply and demand, as well as on related cloud business opportunities We kindly ask our media friends wishing to attend the webinar to fill in the form below for identification TrendForce reserves the right to approve registrations https://seminardramexchangecom/TFVPS/PRInvitationUSaspx?Code=adeio2O&industry=DX&lang=US

Press Releases
Despite Strong 1H20 Server Shipment Performance, COVID-19 Pandemic May Disrupt 2H20 Shipment Schedule, Says TrendForce

2020/04/06

Semiconductors

Continued lockdown of Malaysia and the Philippines, important regions for server back-end manufacturing, may result in a break in the server supply chain According to the latest investigations by the DRAMeXchange research division of TrendForce, owing to strong orders for data center servers and traditional server brands’ preemptive stock-up demand to avoid pandemic-induced breaks in the server supply chain, overall server shipment is expected to remain on the upswing in 2Q20 However, as 1Q20 was a relatively high base period, server shipment is projected to grow by a mere 7-9% QoQ in 2Q20, falling short of the usual double-digit QoQ growths in past second quarters TrendForce Senior Analyst Mark Liu indicates that demand from data centers, namely, the four leading cloud providers in the US, remains the driving force in the server market Owing to trade tensions between China and the US in 2019, the four companies transferred a portion of their production capacities from China to Taiwan, with these production lines having since passed qualifications As such, they were able to fulfill and ship last year’s deferred orders in 1Q20 Although the projected acceleration of the pandemic (which was previously an outbreak in early-2020) in 2Q20 poses risks of hindering the shipment schedules of some parts of the server supply chain, US companies have reacted by changing the shipping location of their servers and related components, among other strategies, to maintain a consistent level of shipment Therefore, they may still register a QoQ shipment growth in 2Q20 Most Chinese companies, on the other hand, have resumed factory operations Apart from undertaking measures to battle the pandemic in 1Q20, new infrastructure plans, including 5G and cloud computing, are gradually executed in 2Q20; server suppliers such as Huawei, Inspur, and H3C have ramped up their stock-up efforts for key components in response to their 2H20 production plans Alibaba has raised its inventory in anticipation for strong server demand in 2Q20 from its “New Retail” business Hema Fresh (known as Fresh Hippo in the west) and from the surge in bandwidth usage during the upcoming 618 shopping festival Likewise, ByteDance has also kept up its server orders to fulfill the demand from its newly built North American data centers TrendForce expects the emerging BAT’s (ByteDance, Alibaba, and Tencent) server demand in 2020 to come from both their overseas business expansions and their infrastructure build-out in China BAT are expected to see a 10-20% YoY increase in server demand this year The pandemic’s influence may be reflected in server shipment starting in 3Q20 The rapid global expansion of the pandemic has deferred the shipment schedule of servers and affected the supply of key components In particular, the Philippines and Malaysia are major manufacturing sites of non-memory server components The pandemic’s expansion in these regions may pose a potential risk of supply chain breakage in the 2H20 server market According to investigations by TrendForce, given that several of Intel’s assembly facilities are located in Malaysia, should the country extend its national lockdown, the production schedule of servers will be impacted in the mid- to long-term as a result On the other hand, some of Samsung’s back-end server DRAM packaging operations are based in Luzon, the Philippines Therefore, the continued quarantine of Luzon may affect the shipment schedule of Samsung’s server DRAM modules Despite normal levels of production at the moment, Samsung will have to reevaluate its capacity assignment in the future, in turn introducing even more unknowns into the current tight supply of server DRAM In short, TrendForce forecasts a constant growth in server shipment in 2020 Under an optimistic scenario, the pandemic can be contained in 2H20, resulting in a 5% YoY increase in yearly server shipment However, if the pandemic continues to accelerate in 2H20, in turn affecting the shipment schedule of servers, then a pessimistic scenario is likely, with a mere 3% YoY increase in yearly server shipment

Press Releases
Owing to Partial Work Resumption and Pre-Chinese New Year Stocking of Components, Chinese Server Shipment to Remain Healthy for Now, Says TrendForce

2020/02/10

Semiconductors

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 US-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

Press Releases
Yearly Server Shipment Remains Identical from 2018 to 2019, with Data Center Demands Driving Market Resurgence, Says TrendForce

2019/12/23

Semiconductors

The demand for servers recovered as the trade war weakened, with projected growths for AWS/FB/Google/MS Dell EMC, HPE, Inspur, Huawei, and Lenovo dominate the server market in terms of 2019 shipment shares According to the DRAMeXchange research division of TrendForce, the global server market has slowed its growth in 2019 in light of factors such as the current global trade situation and the shift of ODM production lines However, as the China-US trade relations improved in 2H19, market demand also returned to form, with data centers being the main driver of market growth TrendForce senior analyst Mark Liu indicates that the primary sources of growth in 2019 ODM server shipment are Amazon Web Service (AWS) and Facebook The two companies see increasing demands for servers in their new self-built APAC data centers and colocation data centers As a result, despite the negative impact of the China-US trade war, the shipment of ODM direct servers for AWS and Facebook is projected to grow by more than 10% YoY On the other hand, the server demand of Google and Microsoft Azure in 2019 is estimated to be a slight decline YoY, primarily since these companies were affected by the shift of ODM production lines in 1H19 But as the yield rate of ODM production stabilized, so did ODM shipment numbers Overall, the four major cloud service providers in North America reached 5-6% server demand growth YoY The growth of data centers in 2020 is expected to maintain the demand for servers The continued expansion of AWS and Facebook’s APAC operations will likely increase the shipment for servers as well Owing to the improved yield of Google’s new production line and to Microsoft’s $10 billion Pentagon contract, the two companies’ server demands are projected to reach double-digit YoY growths in 2020 Dell EMC and HPE see declining shipment in 2019 as a result of the China-US trade war In terms of server manufacturers’ shipment performance in 2019, market leader Dell EMC and second-place HPE registered 5% and 8% declines YoY respectively Dell EMC posted shipment numbers far below expectations because of two factors First, orders from US-based data centers have mostly been redirected to ODM fabs Second, China-based enterprise clients favor domestic brands (such as Huawei, Inspur, etc) due to the China-US trade war, further weakening Dell EMC’s shipment performance Under the simultaneous impact of the global digital transformation process and HPE’s slow adoption of Intel’s new platform, HPE’s enterprise clients redirected their orders to other brands and cloud service providers HPE’s enterprise clients now comprise 97% of its server business, with the other 3% being hyperscale servers With regards to long-term developments in the server market, HPE is likely to hold progressively dwindling market shares Inspur profits from redirected orders resulting from the trade war, while Huawei’s self-built cloud services stimulate in-house server demand Thanks to redirected orders resulting from the China-US trade war, as well as the fact that most large-scale data centers and telecom carriers in China use domestically manufactured servers, Inspur notched shipment numbers of one million units, an 11% growth YoY Owing to the impact from the US ban, Huawei saw weakened shipment numbers in 2Q19, since it could not obtain the necessary components for server manufacturing However, as the China-US trade relations gradually improved in 3Q19, client orders for Huawei servers resurged, with a 60% growth in 2H19 compared to 1H19 The primary drivers of growth for Huawei’s server business stem from servers for 5G infrastructure in the domestic market, and data centers for automakers and telecom operators in the overseas market In addition, Huawei has been gradually migrating its mobile cloud back to its self-built data centers since 3Q19 Therefore, we project Huawei’s in-house server demand to maintain a consistent growth in the coming quarters

Press Releases
Server Shipments Fell Short of Expectations in 1H19 Due to Relocation of Production Lines That Supply Data Centers, Says TrendForce

2019/09/09

Semiconductors

TrendForce’s latest analysis of the server market finds that the global demand was noticeably lower than usual during 1H19 on account of the escalation of the US-China trade dispute As the market enters the second half of the year, the replacement demand associated with the migration to the latest server processor platforms has yet to pick up significantly Moreover, the demand from customers in China’s data center market is still rather uncertain On the other hand, shipments from ODM direct businesses in the US to North America’s data center market is expected to maintain robust growth during the year’s second half The growth from this end will compensate for the other factors that negatively affect the overall demand Consequently, this year’s global server shipments will be roughly on par with the level of the previous year Mark Liu, senior analyst at TrendForce, has this to say about the effect of the US-China trade dispute on the overall server production: “While the trade negotiation between the US and China is at an impasse, ODMs have already taken precautionary measures Most of them started to move production lines out of China as early as 2018 However, the entire supply chain still felt the disturbance of the relocation process in 1H19; and this, in turn, also had some impact on the procurement demand from the data center market during the same period ODM partners of Microsoft Azure, Google, and a few other cloud service providers in the US have moved their L6 lines to Taiwan as requested by their clients The issue is that the production yields from these lines have dropped following their relocation, leading to downward corrections in shipments We expect that the yield rates of the relocated L6 lines will not return to their normal levels until the end of this year or perhaps even later in 2020 It is also worth mentioning that most of the production lines that supply AWS and Facebook are still in China Since these two major clients are willing to absorb the costs associated with higher tariffs, server shipments destined for them will remain steady throughout this year” Server shipments in China are expected to drop slightly this year due to the US export restriction TrendForce currently projects that the total annual server shipments in China for 2019 will drop by about 4% YoY because of the effect of the US export restriction on certain major Chinese suppliers to data centers (eg Huawei and Sugon) Customers in the data center market have gradually diverted their orders to alternative suppliers such as Inspur Despite the trade frictions between the US and China, most of the enterprises that build and operate large-scale data centers still use China-made servers Among the top five server manufacturers by shipments for this year, Inspur will be the only one to post a positive YoY growth with the rate currently estimated around 10% The current outlook of the whole server market indicates that the scale of server shipments worldwide in 2019 will be close to that of 2018 North American OEMs are again the main growth contributors, and they are expected to account for around 40% of the total shipments in 2019 From the perspective of market segments, enterprise servers still command the majority market share However, suppliers catering to this segment are facing shrinking demand as businesses are increasingly relying on cloud services Looking ahead, much of the demand will shift toward the kinds of servers used in large-scale internet data centers Also, the forthcoming rollout of the 5G network will trigger another wave of procurement from the telecom industry and cloud service providers Hence, TrendForce forecasts that hyperscale servers deployed in data centers owned or leased by cloud service providers and telecom companies will account for nearly 33% of the total annual shipments for 2019 This share figure is expected to reach the 40% level in 2020

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