The enterprise Solid State Drive (SSD) market is encountering significant challenges due to the combined impacts of high inflation, economic downturn, and changing server demand, according to recent research by TrendForce. The findings highlight the shifts in strategies of Cloud Service Providers (CSPs), server vendors, and SSD manufacturers amidst these evolving market dynamics.
The research reveals that CSPs are adopting more cautious capital expenditure strategies, resulting in a consistent reduction in their annual server demand forecasts. This trend is particularly evident in China, where CSPs have reported declining cloud orders and subsequently reduced procurement volumes for enterprise SSDs.
In North America, while some clients have deferred mass production timelines for new server platforms, investments in AI servers have surged. These factors collectively contributed to a 24.9 percent Quarter-over-Quarter (QoQ) decline in global enterprise SSD revenue, reaching an unprecedented low of $1.5 billion in the second quarter.
Although the demand for AI servers remains robust in the third quarter, the overall momentum for general-purpose servers is yet to rebound. This scenario continues to exert pressure on enterprise SSD purchasing volumes, with projections indicating lower annual bit volume compared to the previous year.
In response, SSD vendors are scaling back production to manage inventory growth. High server inventory levels combined with sluggish purchasing momentum are expected to lead to a roughly 15 percent QoQ decline in the average price of enterprise SSDs in the third quarter, potentially impacting revenue performance during the peak season.
However, the surge in demand for AI servers has led to an increased need for Inference Servers, driving the adoption of high-capacity enterprise SSDs. Notably, SK Group’s QLC high-capacity storage has gained traction due to its cost benefits. Furthermore, technologies like HBM and PCIe 5.0 SSDs are generating interest. Vendors like Micron and SK Group are positioned for potential revenue growth in the enterprise SSD market.
Samsung, a major supplier, has been affected by reduced demand for general-purpose servers this year, leading to a decline in revenue from enterprise SSDs. The pivot towards high-end AI computing has further challenged the clearing of server inventories, causing a significant QoQ drop of 34.1 percent in enterprise SSD segment revenue in the second quarter.
SK Group, despite the industry slowdown, has expanded its market share through strategic pricing and stable North American orders, leading to a comparatively modest 18.3 percent QoQ decline in enterprise SSD revenue in the second quarter.
Micron has seen the benefits of consistent SATA SSD orders and the mass production of PCIe SSDs, resulting in a minor 1.8 percent QoQ drop in enterprise SSD sector revenue in the second quarter.
Kioxia has ventured into PCIe 4.0 SSDs and plans for PCIe 5.0 products to penetrate the AI market, while Western Digital aims to shift its focus to PCIe products, anticipating revenue growth through PCIe SSD adoption in servers.
The enterprise SSD market’s evolving landscape highlights the challenges and opportunities amid economic shifts and changing technology demands. The market players’ strategic adjustments underscore the dynamic nature of the industry.