Servers Market Share

Updated: 26 September 2022

Worldwide Server Market Spending Expected to Recover Strongly in 2022 and Continue with a CAGR of 10.7% in a Five-Year Period, According to IDC

The global server market weathered the pandemic market shock in 2020, and subsequently the economic turmoil and supply chain disruptions during 2021, growing at over 6% year over year in each of those two years. The market faces continued challenges in 2022, including an unresolved pandemic, historically high inflation, supply chain disruption and geopolitical conflict. However, the server market has proven very resilient in recent years, as IT infrastructure has evolved from a nice-to-have or add value to becoming a mission critical investment for most organizations. While the nature of investment and workload choices may be impacted by economic and other pressures, overall, the market is expected to continue on a growth trajectory. An aging installed base is primed for refresh in 2022, although increasingly it appears that more of it may spill into 2023. Large cloud service providers will continue their refreshes and expansions steadily through 2026.

Recovery from the COVID-19 pandemic is uneven across geographies as the impact of the virus and the reactions of governments have been varied. However, the overall impact of the pandemic seems to be diminishing.

Supply chain concerns came to a head between Q3 and Q4 of 2021, when inventories were depleted, and delivery depended on components coming in on time. However, the market still experienced high single-digit year over year growth in both quarters. Reports from the market were however that backlogs were increasing during this time, leading to the conclusion that demand has been growing even faster than the market is demonstrating. The supply chain recovery is now expected to turn a corner around year end, and this pent-up demand should be a driving force of some additional growth in 2022 and 2023.

However, as described above, new challenges may hinder the market in 2022, with the biggest wild card being the Russia-Ukraine conflict and sanctions. Globally, the impact from the conflict is expected to be relatively minimal, with some impact on certain component and material supplies, transportation, and macroeconomic conditions such as inflation. Regions and countries closer to the conflict will generally experience a greater impact. The uncertainty of the extent and length of the conflict and sanctions may lead to a dampening of demand as well.

Specific concerns for supply are neon and palladium. Ukraine and Russia supply 90% of the neon used by the US semiconductor industry, which will now have to search for alternative suppliers, as production in Ukraine has been halted and sanctions on Russia will likely prevent that from being supplied. However, the server market is much more reliant on the Asian semiconductor market, which is significantly less dependent on Russian or Ukrainian neon supply. Palladium supply may be disrupted, with most of the demand coming from the automotive industry. Russian palladium is a distant second to South African supply, but a 5-10% reduction could have significant impact on the semiconductor industry for many components, as palladium alloys are used as conductive materials and coatings. Finally, transportation routes that depended on traversing Russian or Ukrainian territory will have to find alternative, longer routes, which will create delays and increase cost of transportation for all industries.

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