Just How Big Is The Whole Power Systems Business?
September 14, 2020 Timothy Prickett Morgan
There may be a lot of economic uncertainty out there in the world, due to medical and political uncertainty that seems to be all over the globe, but there is one thing you can count on: Companies need more compute capacity to do ever-more intricate processing.
In the second quarter ended in June, the server market turned in one of the best quarters in its history – even when you consider the inflation adjusted revenues from the peak Dot-Com Boom nearly two decades ago as 2000 was coming to a close. According to the research done by IDC, server spending rose by 19.8 percent to $24.04 billion, and server shipments rose in near parallel by 18.4 percent to 3.19 million machines. This is not the highest number of servers sold in any given quarter, and in fact, the peak in recent years was in the fourth quarter of 2019, when 3.4 million machines were shipped worldwide, generating $25.35 billion in revenues. Back at the peak of the Dot-Com Boom, which was in the fourth quarter of 2000, the world consumed 1.1 million machines, based on historical data from IDC that we gathered over the decades, and that generated $16.67 billion. Ah, but don’t forget about the time value of money. If you adjust that spending in 2000 with 2020 dollars, that works out to the equivalent of $24.82 billion. So we just turned in the third best quarter in server spending in history.
The thing that is different, of course, is that we are shipping more than three times as many machines and nearly 250X as much raw compute performance in Q2 2020 as we did at the peak in Q4 2000 to generate around the same amount of money. That amount of compute then was probably half transaction processing and batch workloads and half Web stuff, and probably 60 percent to 70 percent of the money was for the former and the rest for the latter, and these days, we would be surprised if transaction processing as we know it in the IBM i world was more than 1 percent of the raw compute sold and more than 5 percent of the aggregate revenue. That’s gut, not data, just to be clear, and if you have a better sense of it, pipe up.
All in all, Big Blue did pretty well, and largely because the System z mainframe cycle is still propelling IBM’s Systems group. IDC reckons that IBM’s server sales, which include Power Systems and System z sales for base hardware and base operating systems, accounted for $1.45 billion, up 22 percent from the year-ago period – and significantly nearly tying Lenovo (which bought IBM’s System x server division six years ago), which had $1.47 billion in sales, up 21 percent. Here is the play-by-play for server revenues by vendor:
The interesting bit for us is that Inspur, which includes the Inspur Power Systems partnership with Big Blue, rocketed up by 77 percent, to $2.53 billion. We have no idea how much of this revenue was for Power-based machines, but we would not be surprised if Inspur’s Power revenues were getting close to what IBM itself is seeing in either its North America or its Europe, the Middle East, and Africa regions. It is reasonable to think that the appetite for big iron in China in particular is huge, and the Intel Xeon SP and AMD Epyc architectures cannot scale compute or memory the way the Power9 chip can, and China needs big iron.
More the pity that IBM can’t still sell its iron in China, but that game was over many years ago when China decided it wanted indigenous server suppliers and was, in fact, one of the reasons why IBM started the OpenPower Foundation. As far as we know, Inspur is still using IBM Power9 chips, not Power8 variants created by Suzhou PowerCore or any other of the several rumored interested parties that have licensed the Power chip architecture. With the Power ISA and the Power A2I core now open source, we could see true Chinese Power chips emerge and be used in Power iron sold in China by Inspur and perhaps others. Whether these will be able to support IBM i and AIX remains to be seen, should they emerge.
It looks like the epic battle between X86 iron and non-X86 iron is somewhat stable, as you can see in the chart above. In the second quarter, X86 revenues rose by 17.4 percent to $21.59 billion, while sales of non-X86 iron – including Power iron, some Arm iron, and a few remaining proprietary chips that get a tiny bit of business here and there – rose by 47.4 percent to $2.47 billion. IBM, by the way, represented 58.6 percent of the revenues generated by non-X86 iron. Aside from Q1 2020, it has been a long time since sales of non-X86 iron helped raise the growth rate of the overall market. Well, since the second quarter of 2018, in fact.