AWS


2021-12-21

Server Shipments Forecast to Increase 4~5% YoY in 2022 Driven by North American Data Center Demand, Says TrendForce

The new normal ushered in by the pandemic will not only become the driving force of digital transformation but will also continue to drive the server market in 2022, according to TrendForce’s investigations. It is worth noting that potential unmet demand in 2021 and the risk of future server component shortages will become medium and long-term variables that influence the market. Analyzing the shipment volume of completed servers, a growth rate of approximately 4-5% in completed server shipments is expected next year with primary shipment dynamics remaining concentrated in North American data centers with an annual growth rate of approximately 13-14%. From the supply chain perspective, the ODM Direct business model has gradually replaced the business model of the traditional server market, giving cloud service providers the ability to respond quickly to market changes. However, based on the unpredictability of the market, TrendForce assumes two forecasts for server growth trends. One, the supply situation of key components is effectively improved. Two, the supply situation of key components is exacerbated.

TrendForce states, based on the current situation as materials issues ease quarter by quarter, the annual growth rate of server shipments in 2022 will reach 4~5%. There are three primary factors driving market momentum. First, the introduction of the Intel Sapphire Rapids and AMD Genoa platforms into the market may once again stimulate the replacement of enterprise client servers and infrastructure construction in data centers. Second, the market generally believes that transformational needs generated by the pandemic in 2022, such as shifts in working paradigms and the new normal, will continue to drive the cloud market. Furthermore, international tensions have led to geopolitical uncertainty, which in turn has encouraged countries to tighten their control over data sovereignty and prompting the emergence of small-scale data centers in specific geographic locations.

Actual shipment volume of completed servers in 2022 depends on improvement of supply chain issues

Based on the two aforementioned assumptions, if the pandemic is effectively controlled next year, and international logistics, satisfaction of materials demand, and other factors either return to normal or fare better than expected, server companies will be able to increase their shipping capabilities and the annual growth rate of shipments in the overall server market will be able to reach 5-6% while the annual growth rate of ODM-Direct will approach 15%, up from the original forecast 13%. However, if the pandemic intensifies next year, the overall global economy will continue under that dark cloud which will greatly affect the willingness of companies to invest. In that case, the estimated annual growth rate of server shipments will fall to only 3-4%. In addition, the growth momentum of North American data centers will also be affected leading to an annual growth rate of ODM-Direct of only 10%, approximately.

As a whole and continuing under the influence of the two-year pandemic, the business trend of flexible deployment is irreversible. Regardless of overall economic changes, TrendForce expects double-digit growth in the demand for ODM-direct servers next year while overall server demand will also maintain a positive growth trajectory. However, continued attention should be focused on issues related to server order fulfillment in the broader market, including the fulfillment rate of key PMIC and LAN chip materials. At the same time, another major market variable will be whether Intel and AMD can introduce their two new platforms as scheduled next year and inject additional momentum into equipment replacement.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

2021-12-15

What changes does the development of data centers worldwide in recent years entail as CSPs rush to compete in the cloud business?

In light of rapid advancements in 5G, AI, cloud computing, and cloud services, TrendForce has observed that, since 2012, the widespread adoption of smartphones has brought about the emergence of certain new applications such as smartphone apps that leverage backend server support. Furthermore, enterprise cloud migration has noticeably accelerated after digital transformation activities began taking place in 2016. As a result, widespread data center deployments took center stage as the industry mainstream prior to 2020.

Moving into 2021, however, one of the many impacts of 5G commercialization on the market has to do with the regional deployment of infrastructures (i.e., small-scale data centers). This trend towards local deployment can be primarily attributed to the increasing stringency of personal data protection laws by governments worldwide that emphasize both the residency and the sovereignty of consumer data. Major public cloud companies are now beginning to establish cloud deployments closer to regions that represent sources of data generation, in order to deliver faster data analysis that is still in accordance with the law.

TrendForce’s observations on the build-out of data centers can be divided into the individual and enterprise aspects. With regards to the former, as connected devices become increasingly widespread and emerging content services more popular in the post-pandemic stay-at-home economy, consumer spending on streaming videos and online shopping began to experience a rapid spike, thereby contributing to a gradual increase in server build-outs for cloud services. Enterprises, on the other hand, have been seeking and deploying more flexible infrastructures in response to pandemic-induced uncertainties. Hence, certainly subscription services and hybrid cloud services have also been gaining momentum in the ongoing trend of cloud migration.

It should be noted that, due to recent geopolitical tensions, which intimately dictate the development of various countries’ industries and supply chains, global enterprises also face rapidly changing market needs as well as a high degree of uncertainties stemming from the pandemic. In turn, enterprise demand for cloud services has also seen a continued rise in the past two years. With respect to the adoption of AI and other emerging technologies, most enterprises prefer cloud services due to such services’ flexible cost structures. TrendForce’s latest investigations indicate that flexible pricing strategies and diverse services offered by data centers have directly propelled the demand from enterprises for cloud applications in the past two years. From the perspective of the server supply chain, these shifts have facilitated a gradual shift of the predominant business model in the server market from traditional server brands to ODM Direct.

In addition, data center-related technologies have also progressed significantly. As the way people work and live transforms, accompanied by the emergence of e-commerce and streaming media, enterprises have also become increasingly well-versed in cloud services and increasingly able to leverage related technologies. As such, the primary sources of competition in the cloud market will include not only infrastructures responsible for computing, storage, and networking, but also emerging technologies such as edge computing and software/hardware integration of related services by major operators. In particular, as 5G services successively kick into gear worldwide, the concept of “cloud-edge-local network” will begin to replace the current “cloud only” framework on a massive scale, thereby extending the relevant commercial opportunities from cloud services to hardware vendors. That is to say, in the future, cloud services will no longer be limited to the software front, as in-house hardware brands from CSPs are set to become the next battlefield while these companies compete to offer comprehensive services.

All of this raises the question of whether the build-out of data centers will involve more challenges and opportunities going forward. TrendForce believes that, in addition to factors such as telecommuting and e-commerce, data center demand from biomedical applications (for instance, the ramp-up of vaccinations) will also experience substantial growth, with the caveat that regulations governing the protection and collection of medical data will be even more stringent than those driving various countries’ data sovereignty endeavors. Hence, privacy and security pertaining to medical data will likely become not only a global pursuit, but also a significant challenge facing the application of data centers.

(Image credit: Unsplash)

2021-10-13

Taiwanese Server ODMs Expected to Account for About 90% of Global Server Production in 2021 by Expanding Production Capacities Outside of Domestic China, Says TrendForce

Escalating trade tensions between the US and China, rising geopolitical issues, increased tariffs, and uncertainties stemming from the COVID-19 pandemic’s emergence last year have compelled server ODMs to actively shift their operations closer to clients as well as engage in risk mitigation strategies, according to TrendForce’s latest investigations. Taiwanese ODMs, in particular, are shifting their production bases away from domestic China and accelerating the installation of additional overseas production lines. TrendForce expects the share of servers manufactured in domestic China by global server ODMs to undergo a 7% YoY decrease this year as these ODMs shift their production bases mainly to Taiwan. Furthermore, Taiwanese ODMs are expected to account for about 90% of total server production this year.

On the other hand, server assembly operations, which are closely related to motherboard manufacturing operations, are also dynamically reserving their L6 capacities. Server assembly facilities located in New Mexico and the Czech Republic are gradually installing new production lines for server motherboards there. Inventec, Wistron (including Wiwynn), and Foxconn all currently possess sufficient motherboard manufacturing capacities for allocation as needed.

While future changes in the overall server supply chain remains to be seen, it should be pointed out that the migration of production bases pertaining to US companies is of particular importance. For instance, North American CSPs have requested their server ODM partners to migrate L6 assembly lines to locations such as Taiwan and Southeast Asia in response to potential geopolitical factors going forward. However, servers to be shipped to non-US regions will still be manufactured in China in accordance with prior plans. Aside from Google and Facebook, both of which have production lines in Taiwan, AWS and Microsoft have also transitioned their production lines to Taiwan.

Regarding major server ODMs’ current progress, most of them have installed new production lines in Taiwan, with Inventec, Wistron, Quanta, and Foxconn making the most headway. For instance, after installing three additional production lines in Guishan, Taoyuan at the end of 2020, Inventec currently operate a total of eight production lines, while Wistron has not only installed several spare production lines in the Southern Taiwan Science Park, but also planned to expand production bases in Southeast Asia at the end of 2021 for capacity allocation purposes. Quanta is aiming to capitalize on demand from 5G-related applications and data center build-outs by continually adjusting its production capacity for motherboards in Taiwan and Thailand. Finally, by expanding the physical capacity of its Taoyuan facility, Foxconn is able to avoid incurring tariffs for its North American clients’ L6 assembly operations.

2021-05-12

Foxconn Dominates ODM Server Market by Taking Nearly 50% of AWS/Azure Server Business

The “new normal” in the post-pandemic era has seen the meteoric rise of high-speed and high-bandwidth 5G applications, which subsequently brought about a corresponding increase in cloud services demand. As such, the global server shipment for 2021 will likely reach 13.6 million units, a 5.4% increase YoY. As commercial opportunities in white-box servers begin to emerge, Taiwanese ODMs, including Quanta, Wiwynn, and Foxconn are likely to benefit.

The prevailing business model of the server supply chain involves having the ODM responsible for the design, hardware installation, and assembly processes, after which servers are delivered to server brands (such as HPE, Dell, Inspur, and Lenovo), which then sell the servers to end-clients. In contrast, a new business model has recently started to emerge; this business model involves having server ODMs responsible for manufacturing specific and customized server hardware, available directly for purchase by such end-clients as cloud service providers, thereby bypassing brands as the middlemen.

With regards to market share, Foxconn accounts for nearly half of the total server demand from Microsoft Azure and from AWS, while Quanta accounts for about 60-65% of Facebook’s server demand.

According to TrendForce’s investigations, ODMs including Quanta, Inventec, Foxconn, Wiwynn, and QCT have all received server orders from clients in the cloud services sector in 1H21. In particular, both Quanta and Inventec received orders from Microsoft Azure, AWS, Facebook, and Google Cloud. With regards to market share, Foxconn accounts for nearly half of the total server demand from Microsoft Azure and from AWS, while Quanta accounts for about 60-65% of Facebook’s server demand, in turn giving Foxconn and Quanta the lion’s shares in the ODM market.

The aforementioned Taiwanese ODMs have been aggressive in growing their presence in the private industrial 5G network and edge computing markets, with Quanta subsidiary QCT being a good case in point as an ODM that supplies servers to both telecom operators and private industrial networks for these clients’ respective 5G infrastructures build-outs.

More specifically, QCT stated the following in a press release dated Jan. 4, 2021:

“Quanta Cloud Technology (QCT), a global data center solution provider, independently developed Taiwan’s first 5G standalone (SA) core network, which recently passed interoperability and performance verifications for 5G Open Network Lab operated by Taiwan’s Industrial Technology Research Institute (ITRI). The core network was successfully connected to partner radio access networks (RAN) and third-party user equipment, realizing end-to-end 5G signal transmission from edge to core and achieving significant acceleration in both uplink and downlink speeds.”

In response to the edge computing demand generated by global 5G commercialization efforts, Wiwynn recently released the EP100 server, which is a 5G edge computing solution compliant with the OCP openEDGE specification. Developed in collaboration with U.S.-based 5G software solutions provider Radisys, the EP100 can function as an O-DU or an O-CU depending on the various 5G RAN needs of telecom operators.

Furthermore, Wiwynn is continuing to develop the next generation of edge computing servers targeted at the enterprise networking and edge computing segments.

Foxconn, on the other hand, has been focusing on developing vertical solutions for private industrial 5G networks. Foxconn’s hardware infrastructure offerings include edge computing servers, TSN network switches, and gateways. The company also offers a slew of software solutions such as data management platforms and other apps, hosted by Asia Pacific Telecom. Last but not least, Foxconn recently announced an additional US$35.6 million investment in its Wisconsin project; this injection of capital will make the company well equipped to meet the demand for servers as well as 5G O-RAN and other telecom equipment.

(Cover image source:Pixabay)

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