Out in Front

Server shipments to rebound in 3Q23 after slip in 2Q23, says DIGITIMES Research

Jim Hsiao, DIGITIMES Research, Taipei 0


Global server shipments slipped 5.7% sequentially in the second quarter and are likely to see only single-digit on-quarter growth in the third quarter due to brand vendors and CSPs both turning conservative toward the second half of the year, even though the new mainstream server CPU platforms are ready for supply, according to the latest figures from DIGITIMES Research's server report

With traditional cloud spending of enterprises and consumers continuing to be undermined by the hiking interest rate in mature markets and subsiding cloud service demand in the post-pandemic era, datacenter establishment of cloud service providers (CSPs) has also been decelerating, leading to CSPs shifting parts of their general server budget to higher-price AI servers to cater to the growing popularity of generative AIs. As a result, overall server procurement in units was down in the second quarter of 2023.

Leading North American CSPs including Meta and Amazon were pessimistic toward demand for their social media and public cloud services and thus significantly reduced their server purchases, resulting in a more than 10% decline in Taiwanese ODMs' shipments to their US-based datacenter operator clients.

Server brands, which had weak performances in the prior quarter, saw their shipments dip slightly from a quarter ago in the second quarter amid sluggish enterprise customer demand on top of pending hardware issues with their new server products. Demand from China-based datacenter operators, however, began to enjoy a shipment rebound thanks to a low comparison base in the previous quarter.

Global server shipments are projected to moderately rebound by 1.5% in the third quarter. As traditional cloud service demand shows no sign of recovery, North American CSPs will step up their spending on high-end AI servers that are dozens of times more expensive than general ones, leading to a small sequential decline in overall server shipments. Server brands' shipments may exhibit a high single-digit sequential growth with the launch of servers featuring new AMD and Intel CPUs, the figures show.

As server brands' shipments of new products continue to ramp up in the fourth quarter, US- and China-based datacenter operators are set to raise their purchases of general-purpose servers as well as AI servers. Global server shipments may therefore show a mid-single-digit sequential growth.