Server Shipments Face Constrained Growth in 2024, DDR5 Adoption Slow

The global server market is anticipated to experience constrained growth in 2024, with an estimated annual increase of 2.3 percent, TrendForce said.
Server shipment forecast for 2024This development comes as Server Original Equipment Manufacturers (OEMs) and Cloud Service Providers (CSPs) reconfigure their investment strategies, resulting in cutbacks in both annual shipments and Original Design Manufacturer (ODM) production plans.

TrendForce points out that, amidst the server market’s ongoing decline, there has been a surge in demand for Artificial Intelligence (AI) applications. This dual influence has set off a chain reaction that has led to the compression of the rollout of new server platforms across the industry. The ramifications of these shifts are particularly evident in this year’s projected server motherboard shipments, expected to decline by 6 to 7 percent. Likewise, whole server shipments are also predicted to encounter a decrease of 5 to 6 percent.

Against a backdrop of economic uncertainty, intensified by increased CSP investments in AI, the server sector is expected to maintain a status quo in 2024 comparable to that of 2023, with whole machine shipment volumes experiencing suppression. Consequently, TrendForce identifies three potential scenarios that could impact the server market and shipment forecasts for 2024.

In the first scenario, if the reduction of CSP inventory temporarily halts, the server market might rebound due to new demands. However, potential factors such as heightened inflation and subsequent economic stagnation could continue to channel investments towards AI, leading to budget constraints.

Moreover, the shift towards cloud services for enterprise servers could also contribute to a slight decline in overall shipments from server OEMs. Therefore, TrendForce’s most probable estimation anticipates a modest YoY growth of 2 to 3 percent in whole server shipments for 2024.

In the second scenario, if the server supply chain inventory remains somewhat intact, coupled with compressed demand for traditional servers due to AI investments, whole server shipments for 2024 could remain steady or even decline compared to current figures.

The third scenario envisions a resurgence of the market to its pre-pandemic state, buoyed by optimistic Capital Expenditure (Capex) plans from major players like CSPs. Additionally, increased consumer spending power and rising corporate IT expenditures could drive whole server shipments to a growth rate of nearly 5 percent in 2024.

Addressing DDR5 adoption, the report highlights a slow uptake due to factors such as the prolonged lifecycle of older products and delayed introductions of new models. Investments in AI servers have led to a reduction in traditional server shipments, significantly impacting OEM expectations for DDR5.

Adjustments in market shares for server Central Processing Units (CPUs) by both Intel and AMD have further influenced the DDR5 penetration rate. TrendForce estimates a modest adoption rate of DDR5, hovering around 13.4 percent for the entire year across CSPs and OEMs.

In conclusion, the 2024 server market landscape appears poised for moderate growth, while DDR5 adoption faces obstacles that have constrained its penetration. The industry’s trajectory will be shaped by the interplay of various economic, technological, and strategic factors throughout the year.

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