TrendForce senior analyst Mark Liu indicates that the primary sources of growth in 2019 ODM server shipment are Amazon Web Service (AWS) and Facebook. The two companies see increasing demands for servers in their new self-built APAC data centers and colocation data centers. As a result, despite the negative impact of the China-U.S. trade war, the shipment of ODM direct servers for AWS and Facebook is projected to grow by more than 10% YoY.

On the other hand, the server demand of Google and Microsoft Azure in 2019 is estimated to be a slight decline YoY, primarily since these companies were affected by the shift of ODM production lines in 1H19. But as the yield rate of ODM production stabilized, so did ODM shipment numbers. Overall, the four major cloud service providers in North America reached 5-6% server demand growth YoY.

The growth of data centers in 2020 is expected to maintain the demand for servers. The continued expansion of AWS and Facebook’s APAC operations will likely increase the shipment for servers as well. Owing to the improved yield of Google’s new production line and to Microsoft’s $10 billion Pentagon contract, the two companies’ server demands are projected to reach double-digit YoY growths in 2020.

In terms of server manufacturers’ shipment performance in 2019, market leader Dell EMC and second-place HPE registered 5% and 8% declines YoY respectively. Dell EMC posted shipment numbers far below expectations because of two factors. First, orders from U.S.-based data centers have mostly been redirected to ODM fabs. Second, China-based enterprise clients favor domestic brands (such as Huawei, Inspur, etc.) due to the China-U.S. trade war, further weakening Dell EMC’s shipment performance.

Under the simultaneous impact of the global digital transformation process and HPE’s slow adoption of Intel’s new platform, HPE’s enterprise clients redirected their orders to other brands and cloud service providers. HPE’s enterprise clients now comprise 97% of its server business, with the other 3% being hyperscale servers. With regards to long-term developments in the server market, HPE is likely to hold progressively dwindling market shares.

Thanks to redirected orders resulting from the China-U.S. trade war, as well as the fact that most large-scale data centers and telecom carriers in China use domestically manufactured servers, Inspur notched shipment numbers of one million units, an 11% growth YoY.

Owing to the impact from the U.S. ban, Huawei saw weakened shipment numbers in 2Q19, since it could not obtain the necessary components for server manufacturing. However, as the China-U.S. trade relations gradually improved in 3Q19, client orders for Huawei servers resurged, with a 60% growth in 2H19 compared to 1H19. The primary drivers of growth for Huawei’s server business stem from servers for 5G infrastructure in the domestic market, and data centers for automakers and telecom operators in the overseas market.

In addition, Huawei has been gradually migrating its mobile cloud back to its self-built data centers since 3Q19. Therefore, we project Huawei’s in-house server demand to maintain a consistent growth in the coming quarters.