Server shipments to pick up in the second half of 2019

Global server shipments are not expected to return to growth momentum until the third quarter or even the fourth quarter of 2019, according to Taiwan-based tech news site DigiTimes, which cited unnamed server supply chain sources. The one bright spot remains cloud providers like Amazon, Google, and Facebook, which continue their buying binge.

Normally I’d be reluctant to cite such a questionable source, but given most of the OEMs and ODMs are based in Taiwan and DigiTimes (the article is behind a paywall so I cannot link) has shown it has connections to them, I’m inclined to believe them.

Quanta Computer chairman Barry Lam told the publication that Quanta’s shipments of cloud servers have risen steadily, compared to sharp declines in shipments of enterprise servers. Lam continued that enterprise servers command only 1-2% of the firm’s total server shipments.

Server shipments began to slow down in the first quarter thanks in part to the impending arrival of second-generation Xeon Scalable processors from Intel. And since it takes a while to get parts and qualify them, this quarter won’t be much better.

In its latest quarterly earnings, Intel’s data center group (DCG) said sales declined 6% year over year, the first decline of its kind since the first quarter of 2012 and reversing an average growth of over 20% in the past.

The Osbourne Effect wasn’t the sole reason. An economic slowdown in China and the trade war, which will add significant tariffs to Chinese-made products, are also hampering sales.

DigiTimes says Inventec, Intel’s largest server motherboard supplier, expects shipments of enterprise server motherboards to further lose steams for the rest of the year, while sales of data center servers are expected to grow 10-15% on year in 2019.

It went on to say server shipments may concentrate in the second half or even the fourth quarter of the year, while cloud-based data center servers for the cloud giants will remain positive as demand for edge computing, new artificial intelligence (AI) applications, and the proliferation of 5G applications begin in 2020.