5G smartphone replacement cycle has just started. 5G smartphone sales have...
2020-08-19 1 ENGLISH REPORTS
Cloud IT infrastructure spending has grown faster (~17.5% CAGR) than global IT infrastructure spending (~6.5% CAGR) over 2015-19, and represents ~50% of total IT infrastructure spending. IDC forecasts that the cloud IT-mix will grow to 60% of that spending by 2022, implying a 10% CAGR vs. a -1.2% for traditional IT infrastructure. Cisco expects consumer IP traffic to grow even faster at a 26% CAGR (2019-22, representing 83-84% of traffic, with business IP traffic growing at a 23% CAGR. We see three enablers of this shift to the cloud: (1) increasing number of connected devices (this gets a further boost with the ramp up of 5G in the forthcoming years) and a rapid rise of video applications; (2) proliferation of services on the cloud accelerating data consumption in businesses, and (3) accelerating AI data analytics. Cloud is driving growth for hyperscalers Cloud servers have outpaced the server market due to much stronger hyperscale and public cloud demand, delivering a 23% CAGR from 2015-18 vs. a 7% server unit CAGR. This part of the market is seeing a further boost from COVID-19-related acceleration in applications from on-premise to cloud. We forecast public cloud server unit growth of 15%/14% YoY in CY20/21, near our bottom-up growth in hyperscale capex at +17%/+17% in that period and outpacing our server unit forecast for -1.9%/+8.7%.
Overall, Cisco estimates there will be in total 628 hyperscale data centres by the end of 2021, vs 509 in 2019, for an 11% CAGR growth. Thus, servers residing in hyperscale data centres are expected to make up over 50% of the total installed servers in data centres globally by 2021 (from 44% in 2019), representing 85% of the total public cloud servers and 87% of public cloud workload and compute instances. Rise of the ODM model and merchant silicon As markets increasingly shift to adopt open-sourced platforms for greater optimisation of the total cost of ownership, starting from hyperscalers and CSPs, and followed by enterprises/ telcos longer-term, Taiwan cloud IT infrastructure ODMs have been key beneficiaries. ODMs’ enhanced sophistication in custom hardware design, flexibility in mass-scale manufacturing, and system integration and comprehensive after-market services coverage globally have helped them gain share at hyperscalers. The combined sales made by ODM Direct in servers increased by 10x over 2011-19, driving their combined share to over 24% in 2019 (just 4% in 2011). This trend is set to continue with the rising share of hyperscalers in the overall server mix. As the datacentre infrastructure’s innovation cycle gets disrupted, large operators’ demand cannot be served by the traditional model (OEMs' collaboration with silicon vendors). In response to this challenge, major OEMs are incorporating merchant silicon and supporting open standards.
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