Arm Server Deployments Surge amid Semiconductor Supply Shortage

Shipment of servers with Arm CPUs reached record levels according to the latest research by Omdia. 5% of the servers shipped in the third quarter of 2021 had an Arm CPU, driven by cloud service provider demand.

Amazon increased the deployment of servers with its in-house developed Arm-based CPU, Graviton. Ampere an independent Arm-based CPU vendor saw a strong demand uptick from its key customers Oracle and Equinix. In China, Huawei is increasing the deployment of servers running its in-house developed Arm-based CPU, Kunpeng, within its cloud business. Overall server shipments remained flat quarter over quarter at 3.4 million units in the third quarter of 2021. Revenues also reached 21.6 billion, up 6% compared to the third quarter of 2020, driven by an uptick in server prices.

“The data center server market continues to be supply-constrained because of the shortage of key semiconductor components like power management ICs, microcontrollers, and other ASICs. The demand for servers remains very strong across market segments and vendor order backlogs are at historically higher levels,“ said Manoj Sukumaran, principal analyst for data center computing and networking at Omdia.

Omdia lowered its annual server revenue forecast to 86 billion reflecting the impact of the semiconductor shortage. Vendors are unable to fulfill all orders, and many expect major spillover into 2022. Omdia does not expect the component shortage to improve until at least the second half of 2022. AMD continued to steadily increase its market share in the server CPU market.

In the third quarter, 18% of the servers shipped had an AMD CPU, up two percentage points from the prior quarter. The group of White Box Vendors, including Wiwynn, QCT (Quanta), Tyan (MiTAC), and Ingrasys (Foxconn), continued to lead the market despite struggles with semiconductor shortages and other supply chain challenges. The strong demand from hyper-scale cloud service providers has created a huge backlog of orders at White Box Vendors, which we expect to be fulfilled next year. A notable market movement in the third quarter is Inspur surpassing HPE in a number of servers shipped. Inspur shipped about thirty thousand servers more than HPE in the third quarter, although HPE remains the third-largest vendor in terms of server revenue.