Data Center Equipment Market

Market Overview

The global data center equipment market size was valued at USD 53.85 billion in 2022. It is expected to reach USD 164.36 billion by 2031, growing at a CAGR of 13.2% over the forecast period (2023–2031). The growing adoption of cloud computing and IoT globally, owing to their advantages, is driving the growth of global data center equipment. Moreover, in recent years, there has been a rise in the amount of data generated globally with the surging proliferation of the Internet. This growing amount of data requires an efficient data storage and processing system, which is anticipated to drive the global data center equipment market growth.

Data center equipment encompasses the physical hardware and infrastructural components utilized to facilitate and oversee the functioning of a data center. Data centers are specialized spaces designed to house computer systems along with other related systems like storage and telecommunications. They also hold the essential networking equipment for connecting and exchanging data with other networks and the Internet.

Data center equipment includes servers, storage systems, and networking equipment, among others. Data center equipment is specifically engineered to function continuously, without interruption, ensuring a consistent and dependable performance for the applications and services it supports. Data centers consistently integrate new equipment and technologies to optimize performance, energy efficiency, and general usefulness as technology progresses.

Market Dynamics

Global Data Center Equipment Market Drivers:

Rapid Adoption of Cloud Computing and IoT

Cloud computing and IoT are revolutionizing the data center landscape. Cloud computing facilitates providing diverse services, including software, platforms, and infrastructure, via the Internet, minimizing the requirement for physical data centers and decreasing operational expenses. Gartner's report forecasts a 21.7% growth in global end-user expenditure on public cloud services, projected to reach USD 597.3 billion in 2023, up from USD 491 billion in 2022.

Moreover, the Internet of Things (IoT) facilitates the connection of diverse devices and sensors via the Internet, generating substantial volumes of data that require processing and analysis. Statista predicts that the global count of Internet of Things (IoT) devices will nearly double from 15.1 billion in 2020 to over 29.0 billion by 2030. The demand for data center equipment capable of supporting cloud and IoT applications is propelled by these technologies.

Increasing Demand for Data Storage and Processing

The rapid and exponential increase of digital data, coupled with the requirement for efficient data storage and processing capabilities, is fueling the demand for data center equipment. The global mobile data traffic has experienced exponential growth, with a CAGR of over 50% since 2010. The increase in mobile data usage has necessitated substantial network extensions during the 4G era. There was a rise in the number of cellular radio sites, and extra wireless spectrum was implemented.

With the advent of the fifth generation of cellular network technology, the demand for mobile data will expand at a CAGR of over 30% in the next decade. This will need network operators to expand their network capacity by a minimum of tenfold. In order to manage this vast quantity of data, firms in various sectors necessitate resilient and expandable data centers capable of delivering high-performance computing, storage, and networking solutions.

Global Data Center Equipment Market Restraint:

High Cost of Data Center Equipment

A major challenge the data center equipment market encounters is the exorbitant expenses associated with constructing and upkeeping data centers. Data centers require specialized equipment, including servers, storage systems, networking devices, cooling systems, and power supply units, which incur significant costs for acquisition and operation.

Furthermore, data centers consume a substantial amount of energy and produce significant heat, necessitating efficient cooling and power systems to handle these factors. As per the Uptime Institute research, the data centers had an average power use effectiveness (PUE) of 1.58 in 2020. This indicates that for every 1 watt of IT power, an extra 0.58 watts is utilized by the infrastructure. The significant initial and continuous expenses can hinder enterprises, particularly smaller businesses, from investing in data center equipment.

Global Data Center Equipment Market Opportunities:

Growing Adoption of AI in Data Centers

The data center market is experiencing significant expansion in adopting new technologies, including artificial intelligence (AI) and other high-performance computing (HPC) resources. Nations worldwide have increasingly embraced artificial intelligence (AI) for various functions. Data centers employ most rack and blade servers to facilitate AI and ML tasks, hence utilizing High-Performance Computing (HPC). Data centers equipped with High-Performance Computing (HPC) exist in Nordic countries, the United States, and Europe. This is expected to contribute to the growth of the advanced equipment industry.

For example, the United States is at the forefront of Artificial Intelligence (AI) globally, extensively using advanced technology in many sectors, such as data centers. The US's projected budget for Federal research and development (R&D) for FY 2021 was approximately USD 157 billion, specifically on AI and quantum computing. This expenditure is anticipated to rise to over USD 170 billion in 2022. Artificial intelligence (AI) can improve data center equipment performance and enable more advanced and automated infrastructure, increasing market opportunities.

Regional Analysis

Region-wise, the global data center equipment market is segmented into North America, Europe, Asia-Pacific, and LAMEA.

North America Dominates the Global Market

North America is the most significant global data center equipment market shareholder and is expected to expand substantially during the forecast period. The global data center equipment market share is projected to be led by North America because of the significant presence of prominent data center operators in the region, including Amazon Web Services, Microsoft, Google, IBM, and Equinix. The region is also home to several of the world's largest and most sophisticated data centers, like the Switch TAHOE RENO facility in Nevada, which covers an impressive 7.2 million square feet area. Moreover, the region exhibits a vital tendency to adopt cloud computing and IoT, fueling the need for data center equipment. As per data from Synergy Research Group, the expenditure of US enterprises on cloud infrastructure services had a 30% growth in Q3 2022 compared to 2021.

Furthermore, Ericsson states that the uptake of 5G subscribers in North America continues to be strong. By the end of 2023, the region is forecasted to have the highest worldwide adoption of 5G subscriptions, reaching a penetration rate of 61 percent. This is expected to result in a substantial volume of data for storage and processing. The United States is leading the way in deploying extensive Internet of Things (IoT) operations, with an astonishing 44% of enterprises fully using this technology. Likewise, it is estimated that by 2030, North America will have more than 8 billion Internet of Things (IoT) connections. The main reason for this rise is the increasing use of smart homes in the area. Moreover, the region is already witnessing the proliferation of hyperscale and edge data centers due to the increasing need for high-performance computing and low-latency applications. Hence, all of these factors collectively contribute to the expansion of the regional market.

Asia-Pacific is projected to experience the most rapid growth in the market for data center equipment. This is primarily attributed to the rapid advancement of the IT and telecommunications industries and the escalating need for data storage and processing in the area. CBRE has noted positive indications of growth in the data center investment sector in recent months, as over USD 1.7 billion of new funds were raised specifically for data centers in Q1 2023. Investors will increasingly prioritize creating new, environmentally friendly assets, including data centers with increased floor loading capacity and sustainability certification. This will additionally bolster the demand for data center equipment.

Furthermore, the region is also witnessing a substantial increase in the implementation of cloud computing and the Internet of Things (IoT), leading to a rise in the need for data center equipment. According to IDC's Worldwide Semiannual Public Cloud Services Tracker, the market for public cloud services (PCS) in the region, excluding Japan and China (APeJC), reached a total value of USD 32.5 billion in 2022. This represents a year-on-year (YoY) growth rate of 25.3%. Moreover, numerous businesses use cutting-edge data center equipment to improve their operational effectiveness. For instance, Cloudify.Asia, an IT and cloud service provider, implemented AMD EPYC 7402 CPU in Dell EMC PowerEdge R7525 servers to enhance the IT infrastructure and handle data from various cloud clients. This is expected to strengthen the growth of the regional market.

Segmental Analysis

The global data center equipment market is segmented based on IT infrastructure and applications.

Based on IT infrastructure, the global data center equipment market is classified into networking equipment, servers, and storage.

The server segment dominates the global market. A data center server is a high-performance computer or system designed to manage and process data within a data center efficiently. Data centers are specialized facilities that accommodate many servers and related components, including telecommunications and storage systems. Its purpose is to cater to various businesses' computing and networking requirements. A data center server has the primary function of hosting and executing applications, storing and handling data, and enabling communication both within the data center and with external networks.

Moreover, these servers are specifically engineered to deliver exceptional performance, dependability, and scalability to fulfill the requirements of contemporary computing environments. Data center servers exhibit diverse form factors, designs, and capabilities. Common data center server types encompass rack-mounted servers, blade servers, tower servers, and enterprise servers.

Based on application, the global data center equipment market is bifurcated into IT and telecom, BFSI, government and defense, healthcare, and energy.

The IT and telecom segment owns the highest market share. The IT and telecom segment is projected to experience substantial growth due to its extensive utilization of cloud computing and IoT. These technologies necessitate the presence of data centers to offer various services, including software, platforms, and infrastructure, via the Internet. This increase is attributed to the widespread adoption of smartphones and the surge in internet users worldwide.

Moreover, the introduction of 5G technology significantly impacted the category in 2020, and this trend is anticipated to persist in the coming years. The emergence of Network Function Virtualization (NFV) and Software-Defined Networks (SDN) in supporting OTT Platforms, M2M communication, and online gaming is likely to drive the expansion of this category and lead to increased investments in data centers in the foreseeable future.

Recent Developments

• September 2023- VVDN Technologies announced its collaboration with Axiado Corporation on Open Compute Platform (OCP)-compliant data center and telco Open Radio Access Network (Open RAN) servers.
• December 2023- Moore Threads, a well-known Chinese GPU producer, introduced the MTT S4000, a powerful graphics card designed exclusively for AI applications and data center operations.