Prices of Servers and Other Data Center Equipment Expected to Skyrocket

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Server and other data center equipment prices are projected to rise sharply in the near future, owing to worldwide semiconductor shortages. It is one of the key findings in the market report published by Dell’Oro, in their report named Data Center Capex 5-Year Forecast.

Nonetheless, during the next five years, server expenditure is expected to rise at an annual pace of 11%, accounting for over half of all data center CAPEX by 2025.

Photo Baron Fung
Baron Fung has considerably extended Dell’Oro’s data center infrastructure coverage since joining the company.

Due to a shift in corporate and consumer behavior, the pandemic resulted in a surge in demand for computers and digital technology. The current capacity of semiconductor foundries is insufficient to match the recent rise in worldwide demand. Server and other data center equipment prices are expected to skyrocket in the near future, owing to worldwide semiconductor shortages. Server average selling prices (ASPs) might rise into the double digits, as they did in 2018, which was another period of constrained supply and high demand.

However, Dell’Oro report author Baron Fung believes that in the long run, supply and demand dynamics will balance out, and technology changes will drive market development. His five-year prediction is shaped by the following three technology trends:

  • CPU Refresh Cycles – As the CPU competition heats up, both Intel and AMD have ambitious plans to offer new platform upgrades. The Intel Sapphire Rapids and AMD EPYC Genoa, both slated for release in 2022, will have more processing cores and memory channels, as well as compatibility for the newest interfaces including CXL, DDR5, and PCIe Gen 5, which might allow tighter server form factors and novel designs.
  • Accelerated Computing – A new class of accelerated servers is developing, which are tightly packed with co-processors and designed for application-specific workloads like artificial intelligence and machine learning. Some cloud service providers, such as Amazon and Google, have deployed faster servers based on internally created AI chips, while other Cloud service providers and companies have used GPUs and FPGAs in their solutions. By 2025, Dell’Oro expects the attach rate of servers with accelerators to reach 13%.
  • Edge Computing – Certain latency-sensitive applications, such as cloud gaming, autonomous driving, and industrial automation, necessitate the placement of Multi-Access Edge Compute (MEC) nodes near the network edge, where sensors are placed. Unlike cloud computing, which has largely replaced business data centers, edge computing opens up new markets for unique applications.

Dell’Oro expects that data centers will be better suited to execute application-specific workloads with fewer, but more powerful and denser servers. This would boost the total potential market through higher server ASPs, thanks to the development of CPU platforms and the expansion of accelerated computing. Edge computing, on the other hand, will expand the industry by allowing for greenfield server development at scattered edge sites.

About the Author

Baron Fung joined the Dell’Oro Group in 2017. Mr. Fung has considerably extended Dell’Oro’s data center infrastructure coverage since joining the company. His focus is on cloud service provider CAPEX, server technology, and vendor trends. Mr. Fung has spoken at investment conferences as a guest speaker.

More information about the ‘Data Center Capex 5-Year Forecast’ report can be found here.

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