Data Center Server Market

Market Overview

The global data center server market size was valued at USD 94.11 billion in 2022. It is estimated to reach USD 132.79 billion by 2031, growing at a CAGR of 3.90% during the forecast period (2023–2031). Advanced technologies like big data, artificial intelligence, IoT, and cloud computing are resulting in demand for increased rack power density, with data center operators now needing to upgrade their existing infrastructure. This will create a demand in the data center industry for highly sophisticated servers.

Data centers are designated archives that provide a physical or virtual infrastructure for storing, processing, organizing, and distributing an organization's data and vital files. They are uniquely designed and distinguishable as internet-facing or enterprise (or "internal") data centers. Data centers contain the most vital systems of a network, as they are essential to the continuity of daily operations.

In certain organizational contexts, a data center can assume the form of a sizable and centralized facility that accommodates a multitude of IT support systems and solutions. In contrast, it may be a tiny room containing physical files and reports for others. Data centers exist in numerous industries, including healthcare, financial institutions, information technology, retail, and government. The servers are the backbone of data centers and are typically used to transfer data between multiple computers.

Market Dynamics

Global Data Center Server Market Drivers

Rising Digitalization and Development of Internet Infrastructure

The increase in internet speed and the growth in internet users has led to a huge generation of data and increased social media penetration over the past few years. Across the globe, the number of internet exchanges is increasing to improve data connectivity since internet exchanges will create more connectivity between the data center facilities.

Owing to increasing interconnectivity worldwide, significantly more data will be generated at various points. Data center operators will likely install more advanced servers to improve data processing, leading to higher server density. The countries in Asia-Pacific, the Middle East, and Africa are witnessing advancements in terms of digitalization; therefore, the server market is likely to grow during the forecast period.

Data Center Construction to Drive Procurement of High-Density Servers

The data center market witnessed growth in recent years by adding over 500 data center facilities and expansion projects in 2021. The colocation service providers significantly contribute to hyperscale data center projects, wherein global cloud service providers are leasing colocation facilities.

North America dominated the market in 2021 for hyperscale development, accounting for more than 58% of all global investments. Other regions, such as Western Europe, contributed over 28% of the overall investment. As the world is witnessing the growth of digitization, procuring high-density servers is expected to increase during the forecast period. The deployment of edge data centers is growing, increasing server investments in recent times.

Global Data Center Server Market Restraint

Cyber Security in Data Center Facilities

In terms of security, server-level security is one of the major concerns data center operators face. In data centers, DDoS attacks are becoming more common with the combined use of server sockets; web server threads can get affected in these facilities. Cybersecurity attacks have risen recently and frequently target sectors such as healthcare, education, BFSI, and the government. For instance, in February 2021, a cyberattack on a law firm led to a leak of personal health information from University of Pittsburgh Medical Center (UPMC) patients. Thus, cyber security concerns in data center facilities are expected to restrict market growth.

Global Data Center Server Market Opportunities

Artificial Intelligence Adoption in Data Centers

The data center market is witnessing substantial growth in advanced technology adoption, such as AI and other HPC resources. Countries across the world have substantially started adopting AI for several operations. High-Performance Computing (HPC) in data centers utilizes most rack and blade servers to support AI and ML workloads. Countries in the Nordics, the US, and Europe have data centers with HPC, which is likely to increase the market for advanced servers.

For instance, the US is a world leader in Artificial Intelligence (AI), with significant technology adoption in various industries, including data centers. In FY 2021, the budget for Federal research and development (R&D) in the US was estimated to be over USD 157 billion, focusing on AI and quantum computing, which is expected to increase to over USD 170 billion in 2022. AI can enhance server infrastructure and facilitate more intelligent and automated infrastructure, thereby providing opportunities for market growth.

Regional Analysis

North America Dominates the Global Market

Based on region, the global data center server market is bifurcated into North America, Latin America, Western Europe, Nordics, Central and Eastern Europe, the Middle East, Africa, and Asia-Pacific.

North America is the most significant global data center server market shareholder and is anticipated to exhibit a CAGR of 2.53% during the forecast period. North America is one of the most mature server markets as the investments in data centers are considerably high due to the growing digitalization. The growing popularity of IoT, the emergence of 5G networks, the COVID-19 pandemic, and the demand for streaming online entertainment content at high speeds are the major factors driving the growth of the North American data center market. The major server players in the North American data center market include Dell Technologies, Intel, and Cisco Systems.

Additionally, the North American market witnessed significant investments from the cloud and hyperscale operators in 2021, including Facebook, Google, AWS, and Microsoft. Most cloud operators design and use customized servers in their data centers in collaboration with OCP to improve the performance and flexibility of their facilities. In addition, the adoption of data center servers by several companies in the region is driving market growth. For instance, Dropbox adopted HPE's technology, such as e ProLiant SL4540 server and engineering services, to significantly grow its cloud operations.

Asia-Pacific is estimated to exhibit a CAGR of 4.62% over the forecast period. The Asia-Pacific market for data center servers will likely grow as several data center operators invest in the region. The data center operators will likely invest more in high-efficiency servers to improve the facility's performance. X86 processor servers will continue to dominate the market, and it is expected that the market for ARM processor servers will rise as cloud service providers and various hyperscalers enter the market. In addition, Cloudify.Asia, an IT and cloud service provider, has cloud regions in various Asia-Pacific countries, including Japan, Malaysia, Singapore, Indonesia, and Bangladesh. It deployed AMD EPYC 7402 CPU powered with Dell EMC PowerEdge R7525 servers to improve the IT infrastructure and manage data from multiple cloud customers.

In Latin America, server market players like Huawei Technologies, HPE, Dell Technologies, and Cisco, among others, have a strong presence and have witnessed robust demand for their server solutions over the past three years. The increasing data traffic in Latin America increases the market's demand for high-performance infrastructure with low latency. As a result of investments from telecom and colocation data center operators, the server market is anticipated to expand during the forecast period. It is expected that the adoption of servers using advanced technologies will replace traditional servers in data centers. Server refresh is also being done in many existing regional data center facilities.

In Western Europe, the major contribution to the server market was identified from the UK, followed by Germany and France. The server market was driven by the increased demand for colocation and the development of cloud regions by operators. Data centers in Western Europe are being built to support OCP server infrastructure solutions. This is aided by the expansion of ODM solutions in the market. In Western Europe, the data center operators will likely invest in x86 and ARM processor-based servers. The financial services and e-commerce sectors will increasingly use X86 servers, deploying big data analytics technologies to obtain a competitive edge. From an industry perspective, the Western European server market will likely witness increased revenue contribution from IT, automotive, logistics, manufacturing, and media and entertainment industries.

In Africa, the steadily growing investments for data center developments and the start of entry of global data center operators will fuel the data center market in the coming years. The growing technology penetration, rising demand for data centers, and lack of locations for developments will increase the need for deployments of edge data centers in the region in the coming years. This, in turn, will fuel the need to install micro servers in those facilities. The hyperscale developments are also expected to fuel the demand for high-density servers based on the demand across those data centers.

Segmental Analysis

The global data center server market is segmented by sector and server type.

Based on the sector, the global data center server market is bifurcated into BFSI, government, cloud, IT and telecom, and other sectors. 

The cloud, IT, and telecom segment dominates the global market and is projected to exhibit a CAGR of 3.48% over the forecast period. Cloud service providers have been gaining traction worldwide with the rising interest of governments and businesses shifting data to virtual servers. Cloud and IT service organizations include cloud service providers (CSPs) and other managed-to-host service providers. These providers are involved in offering three services, i.e., Platform as a Service (PaaS), Infrastructure as a Service (IaaS), and Software as a Service (SaaS). These providers procure storage systems suitable for various customers and their various business operational scenarios across industry verticals.

In addition, the telecom sector is heavily connected to the data center market. The daily data traffic from the industry makes it a major growth area for data center operators. The telecom and IT infrastructure market players often develop or collocate telecom data centers. With the growing transformation in the operational design of telecom companies, the data center market is growing to cope with the demand for hi-tech infrastructure needs.

The government sector is witnessing significant growth, fueling the demand for data centers worldwide. Government organizations worldwide have started storing data in enterprise self-built data centers. The growing need for data security portability and easy accessibility is necessary. The access to the data by authorized personnel and the demand for data storage is driven by several government entities across the globe. In addition, the growing development of data centers by government bodies worldwide is fueling the server infrastructure market. Government policies such as data localization have resulted in investments by governments in developing data centers. Governments across the globe are shifting to cloud platforms for data processing and storage.

Based on server type, the global data center server market is segmented into rack servers, blade servers, and microservers. 

The rack servers segment owns the highest market share and is predicted to exhibit a CAGR of 3.63% over the forecast period. Rack servers, also called rack-mount servers, are designed and shaped in a rectangular structure in the data centers. Most of the rack servers have a 19-inch server configuration. The rack servers are also offered in 23 inches and 24 inches for data centers. Rack servers are designed to be more powerful and used for high-end applications, and all the components of the servers can be operated as a standalone system. Data centers cater to high-performance servers; therefore, in most data centers, 4U racks are installed as the servers provide high performance and save space.

In addition, the servers are deployed one on top of the other in a stack. Rack servers are more efficient as there is less space needed for installation than traditional servers. They have self-contained power sources, CPU, and memory; the working of rack servers is standalone. Rack servers are cost-efficient and energy-efficient; they can easily be deployed in small data centers.

Blade servers usually have multiple circuit boards with CPU and network controllers. Blade servers are usually modular servers that allow multiple servers to be fitted in a smaller area. In blade servers, the energy can be provided to multiple racks via chassis; therefore, the energy consumption is less. Regarding data processing, blade servers usually have minimal space requirements with high power density. The cabling of blade servers is less, and so is deployment time compared to other traditional servers. In addition, blade servers are used for high computing requirements in enterprise storage systems such as network-attached storage and storage area networks. The initial installation of blade servers incurs a significant capital expenditure (CAPEX), and additional scale-up costs can provide challenges if additional blade servers are required.

Recent Developments

• May 2023- Ampere Computing, a startup chipmaker headed by former Intel president Renee James, announced a new family of custom-designed, Arm-compatible server processors with up to 192 cores – the industry's highest core count to date, according to the company.

• May 2023- KIOXIA America, Inc. announced that its CD7 Series Enterprise and Datacenter Standard Form Factor (EDSFF) E3.S NVMeTM SSDs are the first to ship on Hewlett Packard Enterprise servers and storage (HPE).