25G ports soar despite server market slowdown: Dell'Oro

The market analyst says the Tier 2 cloud and high-end enterprise segments drove demand for 25 Gbps in the first quarter, displacing 10 Gbps ports.

One of the largest North Atlantic seabirds, the gannet soars before spectacularly plunging in pursuit of fish.
One of the largest North Atlantic seabirds, the gannet soars before spectacularly plunging in pursuit of fish.

According to a recently published report from Dell’Oro Group, a market analyst for the the telecommunications, networks, and data center IT industries, the worldwide server market grew at the slowest pace in eight quarters in 1Q 2019, increasing one percent year-over-year.

The lower market growth rate was attributed to spending deceleration by cloud service providers and enterprises. “After a record 29 percent revenue growth last year, the server market is off to a slow start with a modest one percent growth,” said Baron Fung, director at Dell’Oro Group.

Fung continued, “In this quarter, server unit shipments declined for the first time in five quarters, and growth in server average selling prices started to plateau as the refresh cycle winds down. Furthermore, the major cloud service providers are slowing capex in aggregate to digest excess infrastructure capacity, resulting in fewer server purchases."

The new report includes an extensive analysis of cloud capex that forecasts a return to stronger growth by late 2019. "Looking ahead, as the enterprise continues to shift workloads to public cloud, we expect the cloud service providers to resume capex growth to expand capacity by late 2019,” explained Fung.

Additional highlights from Dell'Oro's 1Q 2019 Server Quarterly Report include the following:

-- Dell ranked No.1 in vendor revenue share, followed by HPE, Inspur, Lenovo, Cisco, Huawei, and IBM.

-- Data center-related capex of the top 4 cloud service providers grew in the mid-single digits year-over-year.

-- White box servers, which are primarily deployed by the top 4 cloud providers, continued to gain share from the branded OEM vendors despite a Y/Y decline.

Dell’Oro's Server Quarterly Report provides in-depth coverage of the server market with tables covering manufacturers’ revenue and port shipments for blade, high-density, and standalone servers. The report describes network, VM density, and white box, versus traditional enterprise server shipments.

Despite the server market slowdown, in a concurrently published report, Dell’Oro states that shipments of 25 Gbps Ethernet controller and adapter ports reached a new height in 1Q 2019. Meanwhile, the analyst warns that the rest of the Ethernet controller and adapter market "remains challenged."

“Shipment of 25 Gbps ports surpassed 1.5 million, the highest level ever, despite a slowdown in server shipments to Amazon, the largest end-user of 25 Gbps,” noted Dell'Oro's Fung.

Additional highlights from Dell'Oro's 1Q 2019 Controller & Adapter Quarterly Report include the following:

-- Total controller and adapter port shipments declined 3 percent quarter-over-quarter in 1Q 2019.

-- Mellanox gained revenue and port shipment share over Intel, Marvell, and Broadcom.

-- 25 and 100 Gbps ports are expected to drive the majority of growth in 2019.

-- The Smart NIC market is forecast to grow nearly 24 percent in 2019.

Importantly, Fung added, “The tier 2 cloud and high-end enterprise segments drove the demand for 25 Gbps, displacing 10 Gbps ports. Growth of 10 Gbps ports was further hampered as the general enterprise segment, which is transitioning to 10 Gbps, started to ease out of a server refresh cycle."

Dell’Oro's Controller and Adapter Quarterly Report provides complete coverage of the market with tables covering manufacturers’ revenue; average selling prices; and unit and port shipments by speed (1 Gbps, 10 Gbps, 25 Gbps, 40 Gbps, 50 Gbps, and 100 Gbps) for Ethernet and Fibre Channel Over Ethernet (FCoE) controllers and adapters. The report also includes coverage of Smart NIC and InfiniBand controllers and adapters. 

For more information, contact Dell’Oro Group at +1.650.622.9400 or visit www.delloro.com.

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