Edge Data Center Market

Market Overview

The global edge data center market size was valued at USD 11.46 billion in 2023 and is projected to reach USD 62.34 billion by 2032, registering a CAGR of 20.7% during the forecast period (2024-2032). Factors such as the rising need for fast processing, the expanding use of IoT devices, and the widespread availability of video streaming services drive the industry forward.

Edge data centers serve as the fundamental components of the infrastructure edge, as well as its aggregation and access sublayers. The facility contains many racks and is situated close to consumers, bringing computational resources nearer to end users and their devices, where data is being generated. The infrastructure edge layer is an intermediary point between the conventional centralized cloud and the device edge to combine both benefits. These centers expand the primary data centers, allowing for a hybrid infrastructure environment that provides dispersed and centralized storage and computing capabilities.

The growing adoption of emerging technologies such as the Internet of Things (IoT), big data, artificial intelligence, cloud computing, streaming services, and 5G is projected to drive the global need for edge data centers. The proliferation of these technologies results in a substantial amount of data being produced within the network. This, in turn, leads to increased requirements for performance and processing capabilities in data centers. Consequently, there is a growing need for edge data center solutions and services. Furthermore, the increasing need for cost-effective operations, instantaneous data analysis, decreased network congestion, enhanced application efficiency, and organizational flexibility will expedite the expansion of the edge data center sector.

Highlights

• The solution generates the highest revenue share based on components.
• Large facility accounts for the largest market share by facility type.
• IT and telecom accounts for the largest market share by end-user industry.

Market Dynamics

Global Edge Data Center Market Drivers

Rising Demand for Low-latency Data Processing

Edge data centers offer localized processing and storage capabilities that reduce latency and enhance performance, guaranteeing clients a smooth streaming experience. For example, e-commerce platforms like Amazon.com Inc., Alibaba Group Holding Limited, and Walmart depend on punctual and reliable client delivery. Edge data centers can bolster these platforms by providing geographically proximate processing and storage resources, diminishing delivery times, and augmenting inventory management.

Additionally, in October 2021, Schneider Electric, a firm specializing in automation and energy management, launched a new series of edge data center solutions. These solutions encompass pre-integrated tiny data centers that are simple to install and may be implemented in many environments, such as branch offices, factory floors, and remote sites.
Edge data centers optimize latency by strategically managing and storing data near the point of use. This enables efficient real-time data processing for industrial automation, driverless vehicles, and video streaming applications. Edge data centers implement many AI applications, including speech and image recognition, machine learning, and natural language processing. Organizations strive to optimize efficiency and reduce expenses by processing data near the source, thus minimizing the volume of data that must be transported to central data centers for analysis.

Similarly, in May 2022, Dell Technologies presented its findings to the ML Perf Inference v2.0 benchmark suite, which offers solutions for quantifying the speed at which systems perform in different deployment settings. The Dell PowerEdge XR 12 and PowerEdge XE2420 servers are specifically engineered to handle tasks associated with edge computing. The design criteria are derived from practical situations encountered in real-world environments, including intense dust, high temperatures, and vibrations typically found on factory floors. This server is designed for high-performance edge applications like streaming analytics, manufacturing logistics, 5G cell processing, and other artificial intelligence (AI) applications. In response to the need for fast data processing and edge computing capabilities, numerous companies are launching new products and services in the edge data center sector, projected to increase in the foreseeable future.

Global Edge Data Center Market Restraints

Rise in Energy Costs, Supply Chain and Component Shortages, and Cybersecurity Concerns 

Market constraints include increased energy costs, difficulties in the supply chain and components, and worries around cybersecurity. Power expenses account for 25% to 66% of the total operational costs of a data center. Consequently, increasing these expenses could compel businesses to raise prices for their goods. In addition, the Russia-Ukraine war exacerbated the already challenging situation for sectors recuperating from the pandemic. This conflict has led to a bleaker and more intricate environment, impacting electricity prices, intensifying cybersecurity worries, and exacerbating supply chain problems. The epidemic undeniably heightened the demand for data centers.

Nevertheless, the war imposed limitations on the expansion of the market. One significant aspect that received attention following the conflict was the issue of cybersecurity. Attackers are highly likely to target critical infrastructure. Energy businesses, governments, data centers, and IT services organizations are classified as vital infrastructures. Therefore, data center operators must enhance security measures to protect against distributed denial-of-service, ransomware, and other assaults.

Global Micro Data Center Market Opportunity

Technological Advancements, Video Streaming Services, and Well-crafted Business Strategies

Technological progress, the implementation of industrial Internet of Things (IoT) applications, the popularity of video streaming, and the rise of Augmented Reality (AR)/Virtual Reality (VR) are the key factors propelling market growth. Recently, organizations have recognized the significance of latency and proximity in delivering effective customer service due to the increased and widespread presence of IT infrastructure infrastructure.

For example, edge computing decreases the distance between the data center and users in a video streaming situation. This pertains to the growing volume of data being conveyed and analyzed, leading to a more economical and improved user experience. Therefore, firms have been investing in establishing data centers to enhance their streaming services. Furthermore, as 5G becomes more widespread and AR/VR gains popularity, the edge computing ecosystem will thrive in the upcoming years.

Another trend in the market is the growth of geographical reach and knowledge through collaborations and takeovers by significant companies. In May 2023, DartPoints acquired Venyu, a firm in Louisiana specializing in data center infrastructure and cloud services. Through this acquisition, the company will increase its presence by adding 11 data centers in ten U.S. markets, spanning three regions and five states. This expansion will include roughly 325,000 square feet of space and 20 megawatts of power. With the market evolving, several firms anticipate strategically optimizing their business operations to strengthen their place in the worldwide market.

Regional Analysis

The global edge data center market analysis is conducted across North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

North America Dominates the Global Market

North America is the most significant global edge data center market shareholder and is estimated to grow at a CAGR of 20.1% over the forecast period. This region's primary driver of market expansion is the widespread usage of edge data center solutions and services. Furthermore, North America boasts critical-edge data center solutions and service providers, rendering it an up-and-coming region for the market. The area is expected to experience substantial growth due to the increasing commercialization and implementation of 5G networks.

Furthermore, based on a recent report by 5G Americas, which includes data from Omdia, North America led in 5G adoption in 2022, with the technology representing 29% of all connections in the region at the end of 2023. The research highlighted a substantial 64% increase in 5G connections in the area compared to 2022, resulting in 77 million additional connections to its network. North America has a total of 197 million 5G connections in 2023.

Asia-Pacific is anticipated to exhibit a CAGR of 20.8% over the forecast period. Increased investments in the IT sector propel the market for edge data centers in this region, the expansion of end-use industries, and the significant presence of edge computing businesses like Huawei Technologies Co., Ltd, and Fujitsu. The Asia-Pacific region's considerable population and fast urbanization are the primary reasons driving the growth of edge data centers. The need for expedited and dependable connectivity increases as urban migration, and the need for digital services become more prevalent. Edge data centers can meet the need by placing storage and computational resources near end-users, thereby decreasing latency and enhancing the quality of software and services.

Europe is the second largest geographical region. The growing adoption of digital technology in several industries in Europe, along with the increased emphasis on data sovereignty and privacy legislation, are creating profitable growth prospects for the industry. 

Segmental Analysis

The global edge data center market is segregated based on component, facility type, and end-user industry. 

Based on components, the market is segmented into Solutions and Services.

The solution segment dominated in 2023. It is anticipated to dominate the edge data center business over the projected timeframe. The solution segment comprises networking equipment, IT racks & enclosures, DCIM software, and data center analytics solutions in terms of hardware and software. The demand for edge data center solutions is being driven by factors such as the advent of advanced DCIM products, the increase in data center workloads during the COVID-19 pandemic, and the necessity to enhance data center energy efficiency. Hardware solutions are deployed on-site or in a third-party data center, specifically customized to meet an organization's organization's specific needs. The program oversees and synchronizes the processing and storage of data in edge data centers. Such technologies include software-defined networking systems, data analytics tools, and instantaneous data processing applications.

The service segment is the fastest growing. The service category is divided into two categories: professional services and managed services. Professional services for edge data centers enhance service delivery, streamline IT operations, and facilitate cloud projects. The services offered encompass integration and implementation as well as consultation services. Managed and professional services enhance the effectiveness of edge data centers by monitoring and evaluating system performance, detecting obstacles, and implementing standardized practices. Organizations can save costs and minimize the need for skilled IT personnel by outsourcing the operation and maintenance of their edge data center solutions. This is achieved with managed and professional services, which free up internal resources.

The market is subdivided into Small and Medium Facilities and Large Facilities based on facility type. 

The large facility segment dominated in 2023. These successful major enterprises operate in an enlarged and scattered environment, necessitating their focus on proximity, latency, and performance while offering services. An edge data ecosystem facilitates the placement of processing capacity near end users, hence improving service performance and promoting innovation through proximity. Consequently, the increasing demand for edge solutions among large companies fuels the market's growth.

The small and medium-sized facilities segment is the fastest growing. Compact data centers provide greater cost efficiency compared to conventional data centers. Furthermore, implementing data center solutions in small and medium enterprises is driven by the favorable impact of sustainable business objectives.

Based on the end-use industry, the market is segmented into Manufacturing and Automotive, BFSI, Government, Healthcare and Life Science, Retail and E-Commerce, IT and Telecom, Gaming and Entertainment, and Others.

The IT and telecom segment dominated in 2023. The IT and telecom sector is expanding to accommodate the demands of extensive data processing and little delay, thanks to the implementation of technologies like IoT, 5G, augmented and virtual reality, and AI/ML. Consequently, to fulfill these requirements, IT and telecom data centers are undergoing a change process to effectively manage the need for minimal delay and large amounts of data, ultimately leading to an increased demand for edge data centers.

The manufacturing and automotive sectors are the fastest growing. The main driver driving the expansion of the automotive business is the rising acceptance of advanced technologies like 5G and edge computing. These technologies offer dependable and secure high bandwidth, low latency, and mobile applications. 

The BFSI segment is the second largest. The increasing use of products in the BFSI sector to facilitate secure and immediate financial transactions, data analysis, and fraud identification is enhancing market expansion.

Recent Developments

• December 2023 – Edge Centers, a prominent innovator in data center solutions, declared the inauguration of its fifth cutting-edge data center, accomplishing a significant industry achievement by growing its infrastructure within an impressive six-month period. The swift growth highlights Edge Centers'Centers' dedication to delivering state-of-the-art data center services and meeting the growing needs of businesses and organizations.
• February 2024 - Azora, an investment firm, will introduce a new European Edge data center platform. This week, the company introduced Quetta Data Centers in partnership with Core Capital. The business intends to allocate about 500 million Euros (USD 538.5m) towards developing six Edge data centers in Spain and Portugal, with a combined capacity of 60MW.