NEW YORK -- The increased demand for cloud computing and high-density microserver systems has brought the server market back from a state of decline, and drawn battle lines between Intel on the one side and ARM, AMD, and a half-dozen other companies on the other.
“We’re seeing fairly significant change in the server market, which is the unsung workhorse of the internet,” said Rob Lineback, senior market research analyst at IC Insights. “Their role is increasing as far as importance as a result of cloud computing.”
According to the 2014 IC Market Drivers report, server unit shipment growth will increase in the next several years, thanks to purchases of new, cheaper microservers. New microservers are being targeted at a wider range of datacenter applications and cloud-computing platforms. Intel is currently in a struggle with a number of processor suppliers looking to develop new 64-bit server MPUs with cores designed by ARM.
“Intel, as far as microprocessor supplier for servers, has been the market leader for x86 processors in the server market, with just over 85% of the market,” Lineback said. “AMD serves that market, but they have been fading a bit, and there are about a half-dozen or so companies that have been trying to get the ARM processors in their microservers.” Lineback reiterated that there is an effort to develop 64-bit ARM servers, but that right now Intel is the leading company. “They’re trying to respond to the threat of the ARM processors moving into the server market by introducing Atom-based microprocessors.” Lineback noted that Applied Micro, Samsung, Qualcomm, Broadcom, Marvell, and TI are trying to get into the server market. “There are quite a few companies trying to jump in and provide solutions for the next generation of data."
Following two consecutive years of 2% annual sales declines, the total server IC market is projected to rise by 3% in 2014 to $14.4 billion, according to the report. Over the course of the five-period between 2012 and 2017, the server IC market is expected to see an increase of about 1% to $15 billion in the final year of the projection. The report further states that the multicore MPU segment for microservers and NAND flash memories for solid state drives are expected to see better numbers -- and both are featured in a growing number of servers.
As for the cause of the lower server sales volume in the past two years, Lineback includes the economy and price erosion among the culprits. “The weak economy has caused enterprises and companies to cut back on their spending,” he said. “Another cause is the price erosion of servers due to the competition that’s going on. Also the market is in a wait-and-see or pause period because of the options that are starting to emerge with microservers, which is a category that is made up of single-board high-density platforms. A lot of them are ARM-based, and ARM is trying to make a big push into servers, and there has been a hold-back as companies try to come up with the best ways to move forward with their datacenters. There's been some specialization of servers. So there are some functions for which they don’t need traditional full-blown servers, like for tablets and so forth.”
Lineback is optimistic about the near-future for the server market in general. “Going forward the economy is getting a little stronger,” he said. “People are becoming more confident and companies are working through their strategies moving forward. Virtualization has already reduced some of the need for purchases. We’re in a period where cloud computing is bringing in new requirements for datacenters. There’s just a lot going on in terms of changes and that and the economy is holding people back a bit."
Lineback also pointed to companies such as Facebook and Google as drivers of the current market. “Large internet service providers are interested in doing customized servers and having them just assembled in Asia, and that’s also having an impact on the market as well,” he said. “It’s taking away some business from HP and Dell, leaders of the traditional server market.”
That period of growth may be short-lived, however. According to the report, servers made up 13% of total computer systems revenue in 2013 and are expected to reach record high sales in the next three years. But then another economic downturn is expected to halt that rise in 2017. “That’s the year when we expect to see an economic down year. Most of the markets are going to go through that,” Lineback said. “We just see ’16 being the peak year in the current cycle, but it's due to the overall economy and is not specific to servers.”
Elsewhere in its report, IC Insights predicts that microserver sales will rise by 139% in 2014 to $580 million from an estimated $243 million in 2013. The report also projects microserver sales to increase by nearly 72% between 2012 and 2017, coming to $1.2 billion by 2017. These increases are taking place in what Lineback calls “an emerging market niche.” He adds that the numbers show growth that’s rather strong as internet service providers and those running the networks are looking for ways to deal with the huge volume of traffic going over the internet. “Most of the work is relatively mundane or low, lightweight computing,” he said. "It’s somewhat akin to blade servers where you can pack a lot more onto a single core. There’s an effort right now to apply microservers to a wider range of computing.”
Lineback made reference to rumors that Google is looking to make its own processors as an indication of the new trend that internet service providers are coming into the server business in full force. “It fits into what Apple did with the iPhone and the iPad. It makes sense for what Google is trying to do. They’re a big enough company. They could deliver cloud computing to chromebook, their platform. They’d be interested in maybe going so far as doing their own processors. They could easily do what Apple did and find their own foundry. It could be Samsung. Apple and Samsung already work together and Apple and Google see each other as competitors. Google has enough places to go to get server processors. Google could go to TSMC or Globalfoundries, wherever.”
— Zewde Yeraswork, Associate Editor, EE Times