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Component prices skew server market

Global server revenues jump as increased cost of components is passed on

Component price increases have led to 17.8% growth in the worldwide server market, according to analyst Gartner. But prices are set to fall, especially memory chips, which could result in cloud providers offering larger memory configurations to enterprise customers.

Dell EMC secured the top spot in the worldwide server market based on revenue in the fourth quarter of 2018, with 20.2% market share. It was followed by Hewlett Packard Enterprise (HPE), which accounted for 17.7% of the market. Huawei experienced the strongest growth in the quarter, growing by 45.9%.

Adrian O’Connell, senior research director at Gartner, said: “Although these levels of growth were positive, a large part of the revenue increase was due to higher component costs – which led to higher system prices.”

O’Connell said he expected the inflated prices, caused by component shortages, to ease this year. “Key component supply levels have already significantly eased, and we expect this to be passed on to users in the form of lower server prices as we go through 2019,” he added.

For server manufacturers, this will lead to weaker server revenue in 2019, compared with 2018. O’Connell said the relatively weak level of underlying demand across Europe, the Middle East and Africa (EMEA) would also continue.

“EMEA continues to be a strong region for HPE, and the EMC acquisition continues to drive very good server revenue growth for Dell EMC, but the cyclical nature of the high-end server business is currently hampering IBM,” he said.

Gartner predicted that hyperscale and service providers would continue to increase investments in their datacentres, although it forecast this would be at lower levels than at the start of 2017. According to Gartner, the new servers would be needed to meet growing demand for cloud services.

Gartner predicted that a drop in memory prices would lead to increasing demand for memory-rich configurations to support emerging workloads such as artificial intelligence (AI) and analytics.

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