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Is China Hurting U.S. Vendors?
Shipments of servers from Chinese vendors grew at a rapid pace while the top server vendors in the U.S. declined during the first quarter of this year.
Worldwide server shipments were 2.3 million units during the first quarter, growing by just 1.4 percent compared to the same quarter last year, according to Gartner.
Growth was driven by Chinese server vendors Huawei and Inspur Electronics, which were ranked fourth and fifth, respectively, behind the declining Hewlett-Packard, Dell and IBM.
Huawei has been in the top five for server shipments for more than a year, but Inspur Electronics is a new entrant. Inspur builds blade servers, rack servers and supercomputers, and is best known for being involved in the construction of China’s Tianhe-2, which is currently the world’s fastest supercomputer, according to Top500.org.
Chinese servers partly benefitted from the 18 percent shipment growth in the Asia-Pacific region, while shipments in other regions declined, Gartner said in a statement.
Server buying trends have changed in recent years. Companies like Facebook, Google and Amazon, which buy servers by the thousands, are bypassing established server makers and purchasing hardware directly from manufacturers like Quanta and Inventec. That trend in part led to the establishment of the Open Compute Project, a Facebook-led organization that provides server reference designs so companies can design data-center hardware in-house.
Similarly, Chinese cloud providers are building mega data centers and buying servers from local vendors instead of going to the big name brands, said Patrick Moorhead, analyst with Moor Insights and Strategy.
The trend of buying locally is partly due to the security tension between the U.S. and China, but servers from Chinese companies are also cheaper, Moorhead said.
The enterprise infrastructure is also being built out in China, resulting in a big demand for servers. There is also a growing demand for servers from little-known vendors based in Asia — also known as “white box” vendors — in other regions, Moorhead said.
AMD To Focus On China
Advanced Micro Devices has relocated its desktop chip business operations from the U.S. to the growing market of China, adding to its research lab and testing plant there.
The desktop market in China is growing at a fast pace and its shipments of desktops and laptops are equal in ratio, said Michael Silverman, an AMD spokesman, in an email. “The desktop market in China remains strong,” Silverman said.
The move of AMD’s desktop operations was first reported by technology news publication Digitimes, but the chip maker confirmed the news.
The company is also developing tailored products for users in China, Silverman said.
AMD’s move of desktop operations to China brings them closer to key customers such as Lenovo, said Dean McCarron, principal analyst at Mercury Research.
“Not that they don’t have their sales in the U.S.,” but a significant number of those PCs are made in China and then shipped internationally, McCarron said.
AMD is the world’s second-largest x86 processor maker behind Intel. Many PC makers like HP and Dell get products made in China.
Being in China also solves some desktop supply chain issues because it moves AMD closer to motherboard suppliers like Asustek and MSI, which are based in Taiwan, but get parts made in China. Chips will be shipped to customers faster and at a lower cost, which would reduce the time it takes for PCs to come to market, McCarron said.
AMD already has a plant in Suzhou, which Silverman said “represents half of our global back-end testing capacity.” AMD’s largest research and development center outside the U.S. is in Shanghai.
Some recent products released by the company have been targeted at developing countries. AMD recently starting shipping Sempron and Athlon desktop chips for the Asia-Pacific and Latin America markets, and those chips go into systems priced between $60 and $399. AMD is targeting the chips at users that typically build systems at home and shop for processors, memory and storage. The chips — built on the Jaguar microarchitecture — go into AMD’s new AM1 socket, which will be on motherboards and is designed for users to easily upgrade processors.
China is also big in gaming PCs, and remains a key market for AMD’s desktop chips, said Nathan Brookwood, principal analyst at Insight 64. “White box integrator’s play a big role in China,” he said.