Component shortages and price hikes drag down fourth-quarter server shipments in Emea

As component shortages continue to drive up the price of servers across Europe, Middle East and Africa (Emea), IT buyers are holding back on hardware purchases, says Gartner.

According to the market watcher’s quarterly look at the state of the worldwide server market, fourth-quarter 2017 shipments across Emea were down 7.9%, against a 19.9% year-on-year revenue jump to $4bn.

Revenue growth might suggest all is well in the Emea server market, but the reality is quite different, said Gartner research director Adrian O’Connell.

“The main driver for the revenue growth remains the increasing cost of certain components due to supply shortages, with vendors passing that cost increase on to users,” he said.

The supply of semiconductors, and consequently dynamic random access memory (DRAM), appears to have hit the server market particularly hard in recent months.

Industry watchers have attributed the shortages to a mix of issues, including the explosion in hyperscale cloud datacentres, growing demand for internet-connected devices, and the supply chain disruption caused by a series of mergers and acquisitions in the server component space.

To sidestep price rises, IT buyers are re-prioritising their hardware purchases, hence the downturn in server shipments across Emea, said O’Connell.

Although the shortages are expected to ease in due course, a rebound in customer demand for servers will not necessarily follow, he said. “Server prices will fall in 2018, but we do not expect the low demand to ease. So, later in the year, revenues will also reflect the ongoing weakness in Emea.”

From a supplier perspective, HPE retained its position as the server market leader, but was the only manufacturer in the top five to record a significant drop in share – from 35.3% a year ago to 29.4% now, as well as a flat overall growth rate.

Dell and IBM, in second and third place respectively, both chalked up market share gains in Emea during the quarter, with IBM achieving the highest growth rate of all – 67.4%.

“The EMC acquisition is continuing to drive server revenue growth for Dell EMC in Emea, but the cyclical nature of the high-end server business currently favours IBM,” said O’Connell.

The performance of the server market in Emea is slightly at odds with what is going on in the rest of the world, with Gartner’s global data showing server revenue (25.7%) and shipments (8.8%) both up year on year in the fourth quarter.

Overall, global server shipments grew by 3.1% and server revenue by 10.4%, according to Gartner’s full-year take on how the market performed. ................................................................................ ..................................................................................................