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2023/03/08
According to TrendForce’s latest survey of the server market, many cloud service providers (CSPs) have begun large-scale investments in the kinds of equipment that support artificial intelligence (AI) technologies This development is in response to the emergence of new applications such as self-driving cars, artificial intelligence of things (AIoT), and edge computing since 2018 TrendForce estimates that in 2022, AI servers that are equipped with general-purpose GPUs (GPGPUs) accounted for almost 1% of annual global server shipments Moving into 2023, shipments of AI servers are projected to grow by 8% YoY thanks to ChatBot and similar applications generating demand across AI-related fields Furthermore, shipments of AI servers are forecasted to increase at a CAGR of 108% from 2022 to 2026
TrendForce has also found that the four major North American CSPs (ie, Google, AWS, Meta, and Microsoft) together held the largest share of the annual total AI server demand in 2022, accounting for 662% of the annual global procurement quantity Turning to China, localization of manufacturing and self-sufficiency in critical technologies have been gaining momentum in recent years, so the build-out of the infrastructure for AI technologies has also accelerated in the country Among Chinese CSPs, ByteDance was the leader in the procurement of AI servers in 2022 Its share in the annual global procurement quantity came to 62% Following ByteDance were Tencent, Alibaba, and Baidu that comprised around 23%, 15%, and 15% respectively
AI-Based Optimization of Search Engines Is Driving Demand for HBM
Seeing a bright future in the development of AI technologies, Microsoft has invested a considerable sum in the well-known research laboratory OpenAI Furthermore, Microsoft launched an improved version of its search engine Bing this February The new Bing has incorporated a large-scale language model named Prometheus and the technology that underlays ChatGPT Prometheus, in particular, is a collaboration between Microsoft and OpenAI Not to be left out, Baidu launched ERNIE Bot this February as well Initially operating as a standalone software, ERNIE Bot will be integrated into Baidu’s own search engine at a later time
Regarding the models and specifications of the computing chips used in the aforementioned projects, ChatGPT has mainly adopted NVIDIA’s A100 and exclusively utilizes the cloud-based resources and services of Microsoft Azure If the demand from ChatGPT and Microsoft’s other applications are combined together, then Microsoft’s demand for AI servers is projected to total around 25,000 units for 2023 Turning to Baidu’s ERNIE Bot, it originally adopted NVIDIA’s A100 However, due to the export control restrictions implemented by the US Commerce Department, ERNIE Bot has now switched to the A800 If the demand from ERNIE Bot and Baidu’s other applications are combined together, then Baidu’s demand for AI servers is projected to total around 2,000 units for 2023 TrendForce’s survey has revealed that in the market for server GPUs used in AI-related computing, the mainstream products include the H100, A100, and A800 from NVIDIA and the MI250 and MI250X series from AMD It should be noted that the A800 is designed specifically for the Chinese market under the context of the latest export restrictions In terms of the market share for server GPUs, NVIDIA now controls about 80%, whereas AMD controls about 20%
Focusing just on the specifications of the aforementioned GPUs, ones that are involved in high-bandwidth computing and thus require high-bandwidth memory (HBM) have attracted even more attention in the market Using bits as the basis for calculation, TrendForce has found that HBM currently represents about 15% of the entire DRAM market The main suppliers for HBM solutions are Samsung, SK hynix and Micron Among them, SK hynix is expected to become the dominant supplier for HBM3 solutions as it is only one capable of mass producing the HBM3 solution that has been adopted by NVIDIA Also, since HBM solutions on the whole have a very entry high barrier with respect to manufacturing technology, memory suppliers regard them as products with a high gross margin
During the 2020~2021 period, when the COVID-19 pandemic was at its height, buyers of key components raised their inventories above the usual level because of worries about pandemic-induced shortages in the supply chain As a result, the demand for HBM solutions rose significantly in the same period However, the growth of this demand is expected to slow down in 2023 due to the pressure to make inventory corrections TrendForce currently forecasts that the market for HBM solutions will expand at a CAGR that is above the 40~45% range from 2023 to 2025 In sum, cloud companies around the world are going to invest more in AI servers over the years Presently, companies and organizations are scaling back IT spending as the global economy is being impacted by high inflation and sluggish growth However, with applications such as ChatBot and search engines driving the demand for an AI-based technological transformation, cloud companies will prioritize the related businesses or projects when allocating capital expenditure
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2023/03/01
The four major North American cloud service providers (CSPs) have made cuts to their server procurement quantities for this year because of economic headwinds and high inflation Turning to server OEMs such as Dell and HPE, they are observed to have scaled back the production of server motherboards at their ODM partners Given these developments, TrendForce now projects that global server shipments will grow by just 131% YoY to 1443 million units for 2023 This latest figure is a downward correction from the earlier estimation The revisions that server OEMs have made to their outlooks on shipments shows that the demand for end products has become much weaker than expected They also highlight factors such as buyers of enterprise servers imposing a stricter control of their budgets and server OEMs’ inventory corrections
Customers of US-Based Server OEMs Are Slow to Adopt New CPU Platforms, Thus Affecting HPE’s and Dell’s Shipment Growth Rates for 2023
US-based server OEMs, including Dell and HPE as the long-established leading brands for enterprise servers, will be compelled to significantly lower their annual shipment targets for 2023 As for Inspur that is the world’s third largest server OEM, its shipments are going to be mainly influenced by government policies Looking at Dell, it has to deal with the piles of barebones that have accumulated at its ODM partners and warehouses A possible temporary solution is to reallocate the orders going to ODMs so as to relieve some of the pressure However, even if Dell does this, the effect on its bloated inventory will be quite limited TrendForce has corrected down Dell’s server shipments for 2023 and enlarged the estimated YoY decline to 81% As for HPE, it has not made any significant adjustments for now, but its server shipments for 2023 are still projected to drop by 62% YoY
Moreover, TrendForce’s latest investigation finds that after the general adoption of Intel’s Ice Lake platform, most buyers of enterprise servers want to slow down the migration of server CPUs given the total cost of ownership Thus, their passiveness will not only directly affect the shipment share of the servers running on Intel’s Sapphire Rapids platform in 2023 but also the schedule for the switch to Intel’s Emerald Rapids as the follow-up platform With the advancement of the CPU platform not progressing as smoothly as expected, Dell and HPE remain at risk of experiencing further drops in shipments
Inspur Will Face Difficulties in Raising Shipments as Chinese CSPs Cut Their Respective Annual Server Procurement Quantities by Half
Regarding the Chinese server market, its demand has been strongly influenced by government policies such as the projects related to the Government Cloud and the East-to-West Computing Initiative Also, while the Chinese market is undergoing a major transformation at this moment, this development has not significantly affected global server demand as a whole Nevertheless, a series of changes within the ecosystem will be taking place in the country As for Inspur, most of its server shipments during this year will go to tenders for national-level projects or from major state-owned telecom operators Looking ahead, the Chinese server market is expected to remain relatively weak up to the Two Sessions that will be held by the Chinese government in March After the conclusion of this major political event, server shipments in China are expected to start to gradually pick up in 2Q23 However, TrendForce currently projects that Inspur will continue to experience declining shipments this year The YoY drop is now estimated around 32%
There are four main factors behind Inspur's YoY drop for 2023 First, the demand from internet-based services was previously huge in scale but has now shrunk considerably Therefore, the major Chinese CSPs such as Baidu, Alibaba, and Tencent have reduced their respective annual server procurement quantities by about half Second, the export control rules implemented by the US Commerce Department have caused delays in the tenders related to the Government Cloud and the East-to-West Computing Initiative Third, Inspur will be facing more intense competition in the domestic market In additional to newly established domestic server OEMs such as ZTE, H3C, and xFusion, there are also third-party organizations that are supported by government programs for promoting startups and innovations These competitors will likely take a significant chunk of Inspur’s market share Lastly, even though China is moving on from the COVID-19 pandemic, the positive responses from the demand side of the country’s economy have not generated enough momentum for a strong and sustainable recovery At the same time, inflation is dampening consumer spending, so companies across many sectors have postponed their procurement plans
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2023/02/20
Since 2022, DRAM suppliers have been adjusting their product mixes so as to assign more wafer input to server DRAM products while scaling back the wafer input for mobile DRAM products This trend is driven by two reasons First, the demand outlook is bright for the server DRAM segment Second, the mobile DRAM segment was in significant oversupply during 2022 Moving into 2023, the projections on the growth of smartphone shipments and the increase in the average DRAM content of smartphones remain quite conservative Therefore, DRAM suppliers intend to keep expanding the share of server DRAM in their product mixes According to TrendForce’s analysis on the distribution of the DRAM industry’s total bit output for 2023, server DRAM is estimated to comprise around 376%, whereas mobile DRAM is estimated to comprise around 368% Hence, server DRAM will formally surpass mobile DRAM in terms of the portion of the overall supply within this year
Growth of Average DRAM Content of Smartphones Will Become More Limited, and Mobile DRAM Will Account for Shrinking Share of Entire DRAM Market
The growth of the average DRAM content of smartphones began to slow down noticeably in 2022 A major reason behind this development was the huge inventory pressure that smartphone brands were experiencing during that year When developing devices slated for release during 2022, brands mainly stayed with the hardware specifications that could be provided by the components within their existing inventories This approach thus constrained the DRAM content growth Now, in 2023, smartphone brands’ efforts to reduce their stockpiles are gradually yielding a positive result Furthermore, Apple will bump up the capacity and specifications of the DRAM solutions featured in the next generation of the iPhone that is scheduled for release this year Taking these latest factors into consideration, TrendForce estimates that the YoY growth rate of the average DRAM content of smartphones will reach around 67% for 2023 This projection is a significant improvement compared with the YoY growth rate of 39% for 2022 However, TrendForce also forecasts that the YoY growth rate will stay under 10% in the next several years
Turning to servers, their DRAM content growth has been spurred by newly emerged applications related to artificial intelligence (AI) and high-performance computing (HPC) Going forward, servers will surpass smartphones with respect to shipments of whole devices and memory content per box Hence, server DRAM will represent the largest portion of the overall bit output from the DRAM industry in the next several years TrendForce also points out that server DRAM products have a certain degree of price elasticity of demand, and their contract prices have undergone significant reductions since 3Q22 On account of these aforementioned factors, TrendForce projects that the average DRAM content of servers will increase by 121% YoY for 2023
Enterprise SSDs Will Become Largest Application Segment of NAND Flash Market by 2025
Owing to the influence of the COVID-19 pandemic, the market for cloud services has expanded considerably and thereby caused a sharp increase in both server shipments and the average memory content of servers Also, because of this development, enterprise SSDs constitute a growing portion of the entire NAND Flash demand Moving into 2023, with the arrival of the post-pandemic period, the demand bits growth related to client SSDs has decelerated due to the significant contraction of notebook computer shipments However, the sharp slide of NAND Flash prices has also galvanized the demand from the smartphone and server industries Owing the effect of the price elasticity of demand, growth of NAND Flash content per box will reach a YoY rate of more than 20% for both smartphones and enterprise SSDs
It is also worth noting that services that are powered by AI-related technologies will proliferate over the next few years And because of the rising demand for high-speed data storage and HPC, enterprise SSDs are expected to surpass other categories of NAND Flash products in terms of order volume TrendForce currently forecasts that enterprise SSDs will become the largest application segment of the NAND Flash market in terms of demand bits by 2025
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2023/01/31
Facing global economic headwinds, the four major North American cloud service providers (CSPs) have scaled back their server procurement quantities for 2023 and could make further downward corrections in the future Meta is the leader among the four in terms of server demand reduction, followed by Microsoft, Google, and AWS TrendForce has lowered the YoY growth rate of their total server procurement quantity for this year from the original projection of 69% to the latest projection of 44% With CSPs cutting demand, global server shipments are now estimated to grow by just 187% YoY for 2023 Regarding the server DRAM market, prices there are estimated to drop by around 20~25% QoQ for 1Q23 as CSPs’ downward corrections exacerbate the oversupply situation
Looking at the four CSPs individually, the YoY decline of Meta’s server procurement quantity has been widened to 30% and could get larger The instability of the global economy remains the largest variable for all CSPs Besides this, Meta has also encountered a notable obstacle in expanding its operation in Europe Specifically, its data center in Denmark has not met the regional standard for emissions This issue is expected to hinder its progress in setting up additional data centers across the EU Moreover, businesses related to e-commerce account for about 98% of Meta’s revenue Therefore, the decline in e-commerce activities amidst the recent easing of the COVID-19 pandemic has impacted Meta’s growth momentum Additionally, Meta’s server demand has been affected by the high level of component inventory held by server ODMs
Turning to Microsoft, its server procurement quantity for this year will still register a double-digit growth rate because it has not significantly curbed its demand related to enterprise cloud investments However, the growth rate has been lowered to 134% from the previous projection of 169% TrendForce is not ruling out a further downward correction in the future because the recent wave of corporate downsizing that is felt across many sectors could affect Microsoft’s revenue from SaaS Furthermore, as companies cut spending due to the uncertain economic outlook, Microsoft could see limited growth for its cloud-related revenues (eg, revenues from IaaS and PaaS) On the top of all these, inventory reduction is proceeding at a slower-than-expected pace in the server supply chain Therefore, production has been scaled down for servers that run on the Gen 9 platforms (ie, Intel’s Sapphire Rapids, AMD’s Genoa, and Ampere’s Siryn)
Looking at Google, the projected YoY growth rate of its server procurement quantity for 2023 has been lowered to 52% Google’s server procurement plan could still be affected by two factors First, new servers running on Intel’s Sapphire Rapids or AMD’s Genoa have not met Google’s expectations in terms of total cost of ownership This could lead to a shrinkage of Google’s server demand for 2H23 Second, the slump in the e-commerce market during this post-pandemic period is limiting the growth of Google’s revenue from cloud services Hence, Google could scale down its server deployment plan
Lastly, regarding AWS, its orders for components such as CPUs, connectors, and CCLs have been affected by the recent performance of the wider economy On the whole, AWS has shrunk the scale of its component orders by about 30% from last year Therefore, the YoY growth rate of its server procurement quantity for this year has also been corrected down to 62% Two factors could lead to a further revision to its demand First, most its servers that run on its in-house Graviton CPUs are being used to provide services to its clients in the enterprise market If these clients cut their demand this year, AWS will also make a corresponding adjustment to its demand for Graviton servers Second, AWS originally planned to begin the mass production of servers that run on the Graviton 3 platform in 3Q23, but there are now indications of an immediate migration to the new Graviton 4 platform If AWS has formally decided to replace the models that run on the Graviton 3 with the ones that run on the Graviton 4, then the contribution from the servers with the more advanced platform will arrive too late to be reflected in the server shipment figure for this year
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2023/01/09
TrendForce’s latest analysis of the DRAM market finds that the inventory pressure on suppliers remain significant due to the persistently weak demand for consumer electronics Among the top three DRAM suppliers, only Samsung has seen a slight drop in inventory level thanks to its highly competitive pricing strategy To prevent DRAM prices as a whole from making another sharp dive, a few suppliers such as Micron have been cutting production Therefore, the QoQ decline in DRAM prices are projected to shrink to around 13~18% for 1Q23 However, the slump will have yet to reach the bottom at that time Regarding the QoQ changes in the prices of the major categories of DRAM products for 1Q23, PC DRAM and server DRAM are projected to again register a drop that is near 20% Conversely, mobile DRAM will experience the smallest price decline because its profit margin is ready the thinnest
In the PC DRAM segment, PC OEMs have lowered procurement quantity for two consecutive quarters as sales of notebook (laptop) computers have been lackluster Now, moving into 1Q23, PC OEMs hold around 9~13 weeks of PC DRAM inventory Even though they are working hard to consume the existing stock, the traditional low season acts a powerful constraint The overall PC DRAM bit output is expected to fall during 1Q23 because Micron has already made a marginal cut to its PC DRAM production, and SK Hynix will soon follow suit However, supply glut will still be significant in the PC DRAM segment The top three suppliers have been aggressive in lowering prices for DDR5 products, so the DDR5 penetration rate in the PC DRAM segment is projected to reach almost 20% in 1Q23 Regarding QoQ changes in PC DRAM prices for 1Q23, DDR5 products will experience a drop of around 18~23%, and DDR4 products will experience a drop of around 15~20% The ASP of PC DRAM products is projected to fall by around 15~20% QoQ for 1Q23
Turning to the server DRAM segment, server demand is going to fall during 1Q23 because of the effects of the traditional low season, inventory adjustments, and the recent weakening of the global economy North American cloud service providers have already started to dial down server demand in terms of procurement quantity and the pace of server deployment However, suppliers continue to raise the share of server DRAM in production, so this segment continues to face mounting inventory pressure While some suppliers are cutting production, this is not enough to effectively limit the decline in server DRAM prices Regarding QoQ changes in server DRAM prices for 1Q23, DDR5 products are expected to suffer a decline of 18~23%, which is slightly larger compared with the projected drop experienced by DDR4 products for the same period However, the DDR5 penetration rate in the server DRAM segment is projected to reach just around 10% in 1Q23 Thus, DDR4 products are going to determine the extent of the general decline Currently, the ASP of server DRAM products is projected to fall by around 15~20% QoQ for 1Q23
The mobile DRAM segment has benefited from about six quarters of inventory adjustments on the part of smartphone brands Currently, smartphone brands hold 5~7 weeks of mobile DRAM inventory on average, so the inventory situation is fairly optimal On the other hand, smartphone sales have been in a slump A rebound is not expected in the short term, especially after the latest change in China’s policy on controlling COVID-19 outbreaks With smartphone brands lowering their device sales targets for 2023, there will be a certain degree of difficulty when it comes to inventory consumption in the mobile DRAM segment However, mobile DRAM quotes are starting to show a more moderate decline than before because suppliers have scaled back production, and the effect of this will become more prominent over time Moreover, mobile DRAM already has the lowest profit margin compared with other categories of DRAM products Since the market consensus is that the demand for mobile DRAM products will remain weak, slashing prices further will do little in helping suppliers to capture more market share Hence, TrendForce projects that the QoQ decline in mobile DRAM prices will narrow to around 10~15% for 1Q23
With regard to the graphics DRAM segment, shipments are going to ramp up for graphics cards and notebook computers featuring the latest GPUs However, the overall demand for consumer electronics is sluggish, and the previous period for inventory adjustments was quite long Therefore, graphics DRAM buyers maintains a cautious procurement strategy Furthermore, demand growth still lagged behind supply growth in graphics DRAM segment during 4Q22, so inventory continues to pile up for this product category on the supply side Additionally, for the specifications of the mainstream graphics DRAM solutions, there will be a full-scale shift in buyers’ demand from GDDR6 8Gb to GDDR6 16Gb during 2023 With the demand for them becoming more limited, graphics DRAM products based on GDDR6 8Gb will experience more dramatic price fluctuations TrendForce currently projects that the ASP of graphics DRAM products will fall by about 18~23% QoQ for 1Q23, but the decline could get larger if suppliers continue to undercut each other in this segment
Lastly, in the consumer DRAM segment, prices have yet to leave the downturn phase as there are no signs of buyers ramping up procurement activities Also, the flow of consumer DRAM orders related to networking devices was steady before but has now started to gradually decelerate this first quarter Due to these developments, shipments of consumer DRAM products on the whole are going to slide Even though Micron began to cut production in November last year, suppliers’ DRAM inventories have been climbing to new heights This segment will continue to experience excess supply unless suppliers undergo several quarters of inventory adjustments and make larger production cuts TrendForce projects that the ASP of consumer DRAM products will fall by 18~23% QoQ for 1Q23 as supply glut persists in this segment
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
