Dell EMC and HPE server business faces drop in demand

The server market has slowed its growth in 2019 due to factors such as the trade situation and the shift of ODM production lines, according to the DRAMeXchange research division of TrendForce.
Server shipment forecast for 2019Demand for server started picking up in the second half of 2019 driven by investment in data centers.

The main sources of growth in 2019 ODM server shipment are Amazon Web Service (AWS) and Facebook. AWS and Facebook deployed servers in their data centers and colocation data centers in Asia Pacific. The shipment of ODM direct servers for AWS and Facebook is projected to grow by more than 10 percent in 2019.

The server demand of Google and Microsoft Azure in 2019 is estimated to be a slight decline, primarily since these companies were affected by the shift of ODM production lines in H1 2019. The four major cloud service providers in North America reached 5-6 percent server demand growth.

The growth of data centers in 2020 is expected to maintain the demand for servers, said TrendForce senior analyst Mark Liu. The expansion of AWS and Facebook’s operations in Asia Pacific will 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 growths in 2020.

Server suppliers

Dell EMC and HPE faced decline in server shipment in 2019 as a result of the China-U.S. trade war.

Dell EMC posted 5 percent decline in its server business. HPE’s server business dipped 8 percent.

Dell EMC posted shipment numbers far below expectations because of two factors. First, orders from U.S.-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-U.S. trade war.

Because 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 comprise 97 percent of its server business, with the other 3 percent being hyperscale servers.

Inspur notched shipment numbers of one million units (+11 percent) thanks to redirected orders resulting from the China-U.S. trade war. Inspur has also benefited because most large-scale data centers and telecom operators in China use domestically manufactured servers.

Huawei saw weakened server shipment in Q2 2019, since it could not obtain the necessary components for server manufacturing. Client orders for Huawei servers grew 60 percent in H2 2019 compared to H1 2019. The 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 Q3 2019. Huawei’s in-house server demand will maintain a consistent growth in the coming quarters.

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