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  • Happy Days Are Here Again For Systems

    June 4, 2018 Timothy Prickett Morgan

    A combination of increases in memory and CPU prices, beefier configurations often with GPU or FPGA accelerators, and outright ebullient demand for compute capacity is making the server business look like it is exploding when it is merely expanding at a more-than-healthy clip.

    In the first quarter, according to the box counters at IDC, server revenues were up an astounding 38.6 percent to $18.82 billion, the kind of number we have never seen in the history of the server racket. Server shipments – and it is getting hard to count the nodes sometimes – rose by 20.7 percent to just under 2.7 million units. The unit growth, we think, is probably a better indicator of what is going on in the core server business, with average selling prices on the rise as main memory and flash memory prices have gone through the roof in the past year and a half, and GPU accelerators have followed them out of the hole. (FPGAs have always been expensive, and continue to be.) In any event, Intel is charging a pretty hefty premium for its “Skylake” Xeon SP processors , at least compared to their predecessors, and all of these factors have combined to make that 20.7 percent shipment growth in the first quarter nearly double when the money is counted up.

    This is a neat trick, and one that does not necessarily mean that server makers, be they traditional OEMs or upstart ODMs bending tin for hyperscalers and cloud builders, are actually themselves operating at a profit. We think, in fact, that OEMs and ODMs have not been passing a lot of their increased costs wholly on to customers to maintain business, and that they have been less profitable, rather than more, as the boom in servers have kept on a-booming for the past two years or so. Some of that boom is, of course, due to the expanding role of generic servers in the datacenter, particularly as a replacement for sealed-box network and storage appliances that have historically had much higher margins. What the X86 server did to system margins is now happing to a lot of network and storage gear. In the long run, the price/performance of networking and storage will get dramatically better and the “server” market will expand. In a sense, we need to be able to look at all three elements at the same time without overlap, and that is increasingly difficult as the functions do in fact overlap.

    In the first quarter ended in March, the midrange market, which is comprised of machines that cost more than $25,000 but less than $250,000, grew by 31 percent to $1.7 billion. That might be one-ninth the size of the volume server market, which grew by 41.3 percent to $15.9 billion. Even high end machines, which cost more than $250,000 the way that IDC cases the market, were up by 20.1 percent to $1.2 billion, largely on the strength of the early part of the IBM System z14 upgrade cycle.

    IBM was tied for third place in the server racket in Q1 along with Lenovo and Cisco Systems. IBM brought in $989 million, up 32.9 percent but it actually lost two-tenths of a point of market share because the market grew faster. IDC reckons that Lenovo, with $1.09 billion in sales, actually squeaked out in front of Big Blue, unseating IBM from third place in the market – a position that IBM has held for so long we can’t remember when it wasn’t smaller than either Hewlett Packard or Dell. Lenovo grew revenues 50 percent in the quarter, in part thanks to the growth in the former System x server business that Lenovo bought from IBM in early 2015. Cisco was a little bit smaller than IBM, with $980.1 million in revenues in the first quarter, and growing only by 18.8 percent or about half the rate of the market at large. Dell has surpassed Hewlett Packard Enterprise to become the largest server maker as ranked by revenues, with a stunning 50.6 percent revenue increase to $3.59 billion, beating out the combination of HPE and its HC3 partnership with Tsinghua University in China, which had 22.6 percent growth and $3.51 billion in sales.

    The ODM players like Foxconn, Quanta, WiWynn, Tyan, Inventec, and others, collectively brought in $4.59 billion in sales, up 57.1 percent. If you add up the server purchases of the big hyperscalers and cloud builders, they now comprise about a quarter of all server shipments and revenues, according to IDC. This is an astounding statistic, and there are many who think that within a few short years, these relatively small handful of very large customers will be responsible for half of server spending.

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    Tags: Tags: FPGA, GPU, IBM i, Skylake, Xeon

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TFH Volume: 28 Issue: 39

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  • Guru: Ready or Not! Part 3 Of Big Changes In RDi V9.6, Compare/Merge, Code Coverage, and More
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  • Happy Days Are Here Again For Systems

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