While the global server market has grown rapidly over the past two years due to the impact of the pandemic, with an annual server shipment growth rate of 5% projected, there is talk that shipments may be slightly adjusted downward as excess orders are adjusted.

According to a survey by market research firm TrendForce on the 28th (local time), while shipments are increasing due to a surge in global server demand, server shipments in 2022 may be slightly lowered as CSP companies may adjust order volumes in subsequent orders.

TrendForce announced that it expects global server shipments to increase by 6.5% in the third quarter of 2022 compared to the previous quarter. They explained that continued support for companies accelerating cloud migration since the pandemic led to an increase in server shipments.

On the other hand, offering observations on recent server market trends that ODM's previous production plans have begun to gradually cool down, it was noted that "as the material mismatch cycle improved significantly, the inventory momentum of server motherboard suppliers began to decline from the second quarter," and that "at the same time, the pandemic lockdown in Shanghai affected some ODM production."

It stated that enterprise orders, particularly those led by Taiwan's Inventec, were hit, and while production plans including those for Dell and Hewlett Packard Enterprise (HPE) were significantly delayed, it was expected that overall shipment performance would not be affected in the short term.

TrendForce noted that while there are currently no signs that the four major North American cloud service providers (CSPs) will reduce server orders, the industry, which has faced supply chain issues during the pandemic, has continued to be affected by uncertainty regarding the limited supply of rare raw materials on the server side as well.

To meet production targets, buyers are increasing order volumes and stockpiling materials in preparation for shortages. TrendForce analyzed that this has led to increased order estimates across all data centers, OEM clients, and ODMs, resulting in an oversupply of orders in the server market. Therefore, it was predicted that server shipments in 2022 would be slightly lowered as CSP companies are likely to adjust order volumes in subsequent orders.

In addition to the challenge of expected order adjustments across the overall market, server demand in the Chinese market appears likely to be affected by policy factors.

TrendForce explained, “Following the Chinese government’s implementation of energy consumption and internet business policies in 2021, Chinese internet service providers began adjusting their server inventory plans starting in 2022,” adding, “China’s Big 3 IT companies—Baidu, Alibaba, and Tencent—all lowered their procurement volumes this year, with Tencent lowering its purchases in the most obvious way.”

Furthermore, it was noted that the three major BAT conglomerates would take a more reserved stance on cloud deployment, and that among the four major CSP companies in China, ByteDance was the only one to record growth despite the market boom. ByteDance is expected to maintain an average annual growth rate of nearly 70% in server purchases in 2022.

TrendForce emphasized that despite negative factors, the Dongsu-Seosan project, which involves relocating data centers and computing resources to the west, is driving server deployment.

In addition to China Mobile, which had previously shown strong momentum, China Telecom and China Unicom began increasing their server bidding volumes, observing that momentum has become evenly distributed among OEMs in China. While the purchasing power of China's Big 3 CSPs is slowing, server deployments by local governments and server construction by government-backed telecommunications companies are supporting demand in the Chinese server market in 2022.

TrendForce predicted, “Annual server shipments could still reach about 5%,” adding, “However, due to inventory adjustments in 2023 and the impact of the overall economic downturn, there is a high possibility that IT capital investment will slow down, so the growth of the server market will not be as strong as it has been in the past two years.”