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Gartner report: Worldwide server sales revenue increases 16%

News Analysis
Dec 18, 20173 mins
Data CenterDellServers

New hardware from HPE, Dell EMC and Lenovo, as well as demand for capacity, helped drive worldwide server sales in Q3 2017.

2 data center servers
Credit: Thinkstock

The drive toward the cloud is lifting all boats. The need for capacity and new servers combined to lift the server market in the third quarter, with more growth to come, especially for the “white box” vendors.

Gartner reported worldwide server revenue grew by a very impressive 16 percent year over year in the third quarter of 2017, while unit shipments grew by 5.1 percent. That gulf between revenue and units means more higher-end, more decked-out servers are being sold than cheap, commodity hardware.

It helps that in recent months, Hewlett Packard Enterprise (HPE), Dell EMC and Lenovo have all released new hardware, which is helping to drive sales as enterprises refresh their on-premises hardware. So all told, the third quarter was marked by new hardware and continued growth of the cloud.

HPE leads in worldwide server revenue; Dell leads in units shipped

HPE continued to lead in the worldwide server market based on revenue, with $3.1 billion in revenue and a total share of 21 percent for the third quarter of 2017. Dell EMC was right behind it with $3 billion in revenue and 20.8 percent market share. However, Dell led with unit shipments, with 17.8 percent market share to HPE’s 16.7 percent.

In third place for unit shipments was Inspur Electronics with 116 percent year-over-year growth, a name that will undoubtedly elicit a “who?” reaction. Inspur is based in China. And although it has offices in the U.S. and Japan, it primarily sells to its native market, which is seeing significant data center construction. Amazon recently opened a second Amazon Web Services region in China, and Google is planning a Hong Kong data center for 2018.

And that shows the growing popularity of off-brand servers. The Other category grew 8.1 percent to $5.3 billion, with unit sales twice that of HPE. These off-brand vendors, usually Chinese, are popular with hyperscale data centers such as Google, Facebook and Amazon and continue to open a lead over the brand-name vendors as the big three data center owners continue to expand.

IoT driving demand for servers

But it’s not just the troika of Google, Facebook and Amazon driving server sales. DRAMeXchange, a division of market researcher TrendForce, said the demand for servers has soared as the result of industrial transformation and growing popularity of smart end devices. Simply put, more capacity is needed, particularly edge capacity, to handle Internet of Things (IoT) devices.

DRAMeXchange said this will spur a particular growth in memory, since things like cloud computing and virtualization are all done in memory and demand for devices like phones and PCs has not abated. It projects server DRAM to record a growth rate of 28.6 percent in 2018.

However, there is a worldwide shortage of DRAM due to explosive demand and manufacturers are struggling to increase capacity. The result has been an 85 percent increase in DRAM prices in 2017, with prices increasing monthly. And guess where that cost gets passed on to? Yep, you.

The one bright spot is that prices for NAND flash memory have stayed relatively flat and might even decline going into next year, even though regular DRAM prices will continue to rise into 2018.

Andy Patrizio is a freelance journalist based in southern California who has covered the computer industry for 20 years and has built every x86 PC he’s ever owned, laptops not included.

The opinions expressed in this blog are those of the author and do not necessarily represent those of ITworld, Network World, its parent, subsidiary or affiliated companies.

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