Inside Advanced Scale Challenges|Friday, December 14, 2018
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HPE No. 1, IBM Surges, in ‘Bucking Bronco’ High Performance Server Market 

Riding healthy U.S. and global economies, strong demand for AI-capable hardware and other tailwind trends, the high performance computing server market jumped 28 percent in the second quarter to $3.7 billion, up from $2.9 billion in Q2 2017, according to industry analyst firm Hyperion Research. On a sequential basis, second quarter HPC server revenue grew 16.7 percent over the $3.2 billion figure for Q1 of this year.

For the first half of the year, revenue rose 23.8 percent over the 2017 first half, from $5.6 billion to $6.9 billion. Hyperion forecasts that revenue for HPC server systems will reach about $12.9 billion in full-year 2018 and will grow to $19.6 billion in 2022.

Taken together, growth is somewhat better than expected, according to Hyperion SVP of Research Steve Conway.

“The second-quarter numbers contained a bit of upside surprise but not a lot,” Conway told EnterpriseTech. “We were expecting strong results because the U.S. and world economies are generally strong and improving, and because we've been seeing a ramp-up in HPC adoption in commercial markets to run advanced analytics – both on the R&D side, for uses including automated driving systems and precision medicine, and on the business operations side for fraud detection, affinity marketing and other applications.”

In the vendor race for the industry supremacy, Hewlett Packard Enterprise remained the HPC server system global market leader with a revenue share 30.7 percent. Dell EMC kept its place as the second-ranking vendor with an 18 percent share. And IBM moved up to 11 percent and third place based on a strong boost in revenue from the Summit and Sierra supercomputers installed at Oak Ridge National Laboratory and Lawrence Livermore National Laboratory, respectively – the former now ranked the world’s most power supercomputer.

For the largest year-over-year second-quarter percentage gains, IBM led the way at 208.8 percent, followed by Japan's NEC at 76.8 percent, Penguin Computing at 75.2 percent and Cray at 61.9 percent.

Conway termed IBM’s surge “episodic,” rather than a one-time phenomenon.

“The high end of the HPC market has always been lumpy, with results moving up and down when very big systems that can top $100 million each hit a quarter, or are absent from a quarter,” he said. “Big pre-exascale and exascale system acceptances will cause even larger bumps in the quarters they affect because the price tags can sometimes be $300 million or more. Increased revenue is good for the HPC market and it was very good in the second quarter for IBM, but like other vendors able to compete in the stratospheric pre- and full-exascale markets, that market is likely to provide a bumpy ride for IBM. But these vendors already know this market is a bucking bronco.”

Conway attributed HPE’s perennial market leadership to several factors, starting with IBM’s sale of its x86 server business in 2014.

Steve Conway of Hyperion Research

“For years, HPE and IBM battled for revenue leadership in the global HPC market,” Conway said. “IBM's sale of its x86 server business to Lenovo left HPE as the clear revenue leader and vaulted Dell into second place worldwide, though Lenovo and IBM are still forces to contend with. HPE's strengths have been strong corporate commitment to the HPC market, wide product choice, especially following the SGI acquisition, and strong and growing domain expertise that enables peer-to-peer selling.”

As for HPC market sectors, growth in YoY second-quarter growth was led by the high-end supercomputers segment (systems sold for $500,000 and up), with revenue climbing 36.8 percent to $1.6 billion, compared with $1.2 billion in the prior-year second quarter. It accounted for 43.4 percent of second-quarter 2018 HPC server revenue.

The divisional segment (systems sold for $250,000 to $499,000) grew by a “robust though less dramatic” 16.7 percent, from $537 million in the Q2 2017 to $627 million this year. The departmental segment ($100,000 to $249,000) rose 22.2 percent to $958 million from the 2017 second-quarter total of $784 million. And the workgroup segment (less than $100,000) grew 25.7 percent, from $409 million in the 2017 quarter to $514 million this year.

According to Conway, there could reason to expect the high performance server sector to remain robust for reasons beyond the strong economic climate and AI-related demand. He noted a higher-than-usual number of vendors in Hyperion’s “other” category, a catchall category that includes more than 30 unnamed vendors, accounting for 16 percent of worldwide HPC server revenue.

“Most are small vendors and seeing that many small vendors in the market is a strong sign that we're in a period of substantial innovation,” Conway said. “Not all periods in HPC history have been like that.”

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