Monday, January 15, 2018

Renewed growth in servers and Ethernet switching

There are renewed signs of strength in several key industry segments, including servers and switches.
You might think that all of the action is concentrated in public clouds and that the only vendors benefitting from this shift are white box vendors from Asia. But that is not what the Q3 2017 data shows. Certainly, the public cloud is growing by leaps and bounds and ODMs from China and Taiwan are shipping in ever greater volume.
However, a few of the top name brand server vendors, especially Dell, IBM and Cisco (to a lesser extent) are finding renewed growth beyond the handful of hyperscale public cloud projects. This seems to indicate that large corporate data centers are entering a refresh cycle. Intel continues to dominate this sector. Demand for x86 servers increased 20.4% in 3Q17 with $15.4 billion in revenues. Non-x86 servers grew 15.1% year over year to $1.5 billion.
IDC finds that vendor revenue in the worldwide server market increased 19.9% year over year to $17.0 billion in 3Q17.
Top 5 Companies, Worldwide Server Vendor Revenue, Market Share, and Growth, Third Quarter of 2017 (Revenues are in Millions)
Company


3Q17 Revenue


3Q17 Market Share


3Q16 Revenue


3Q16 Market Share


3Q17/3Q16 Revenue Growth
1. HPE / New H3C Group


$3,317.4


19.5%


$3,355.4


23.7%


-1.1%
2. Dell Inc


$3,070.4


18.1%


$2,226.7


15.7%


37.9%
3. IBM


$1,093.7


6.4%


$864.4


6.1%


26.5%
3. Cisco


$992.5


5.8%


$928.0


6.6%


6.9%
5. Lenovo


$861.2


5.1%


$985.0


7.0%


-12.6%
ODM Direct


$4,118.7


24.3%


$2,834.5


20.0%


45.3%
Others


$3,528.7


20.8%


$2,965.5


20.9%


19.0%
Total


$16,982.6


100.0%


$14,159.5


100.0%


19.9%
IDC's Worldwide Quarterly Server Tracker, November 2017

It is good to see this growth is shared by major geographies. IDC breaks down the growth rate as follows:
Server shipment revenue growth (yoy)
·         Asia/Pacific (excluding Japan and China) +30.6%
·         China +23.9%
·         Japan +8.5%
·         U.S. +19.7%
·         EMEA + 19.5%
·         Canada +14.5%
·         Latin America +2.4%.
Servers require switches, so it is not surprising to see this market segment growing in step with the server shipments.

Dell’Oro Group recently reported that Ethernet Switch – Layer 2+3 market revenue reached an all-time record in 3Q17, posting the highest year-over-year growth in five years. The positive results were driven by both campus switching and data centre switching. Cisco did will with its new Catalyst 9K switches and Intent-based networking paradigm. Arista did exceptionally well as evidenced by its most current quarterly financial report and despite the ongoing legal battle with Cisco.

“We are starting to see signs for recovery in the Campus Switching market,” said Sameh Boujelbene, Senior Director at Dell’Oro Group. “Softness in campus switching has been weighing on the Ethernet Switch market over the past two years. It has been outweighing strength in Data Center switching until now as Cisco and HPE captured most of the growth in North American and European campus switching markets during the quarter, while Chinese market remained dominated by Huawei and H3C,” stated Boujelbene.

IDC also reported a strong Q3 for the worldwide Ethernet switch market (Layer 2/3). The IDC figures show $6.75 billion in revenue in the third quarter of 2017 (3Q17), an increase of 7.4% year over year.

See also