Market Trends of China Data Center Server Industry
IT and Telecom to Hold Significant Growth
- The demand for data center servers in the IT and telecom industry is rising with increasing network traffic. Telecom data centers are responsible for managing network resources, such as vRAN and 5G packet core. In contrast, IT data centers are responsible for the IT applications used by the telecom service.
- The telecommunications industry in China experienced several waves of reforms in the last three decades towards liberalization and privatization. Nowadays, China has become one of the largest telecommunications markets in the world. As of 2022, China had more than one billion Internet users, accounting for more than one-fifth of Internet users over the world.
- China's major telecom operators are increasing the proportion of servers they buy that are powered by domestic chips. Huawei states that China Telecom ordered 53,401 servers powered by domestic chips for the 2022-2023 period. This is a significant increase from the 24,823 domestic servers they purchased in the 2020-21 period. With many years of R&D and production expertise, ZTE servers and storage products have been used in over 40 countries and regions, including five major R&D bases in Shenzhen, Nanjing, Changsha, Chengdu, and Shanghai.
- China has become the country with the largest mobile-cellular user base worldwide. When 5G (fifth generation) technology started to hit the market in 2019, China became one of the frontrunners in the global 5G deployment and 5G devices production race. By 2025, China was forecasted to host the most 5G connections in the world, approximately equaling the sum of North America, Asia-Pacific developed countries, and Western Europe. Such factors are expected to create major data center construction, leading to more demand for servers.
Understand The Key Trends Shaping This Market
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Rack Server to Hold Significant Share
- Rack servers are compact and efficient devices that can handle a variety of computing tasks and are commonly used in data center environments where space is at a premium. The advantages of a server rack include increased scalability, maximized airflow when coupled with a cooling system, and ease of regular computer maintenance and diagnostics.
- The province with the highest concentration of server companies is Jiangsu Province, where 30.3% of China's server companies are located, followed by Guangdong Province and Zhejiang Province. In China, there is a demand for rack servers due to the above advantage, and with increasing digitalization, the market is expected to increase.
- The Chinese government is also doubling down on its efforts to boost computing power to help accelerate domestic artificial intelligence (AI) development amid a growing technological rivalry with the US. According to the National Association of Software and Service Companies (NASSCOM), China's IT spending accounts for 1.4% of the country's gross domestic product (GDP), and 2.7% of its total IT expenditure is spent on cloud services, which is expected to increase by more than 10% in coming five years.
- E-government services were brought in to simplify various government processes online and provide better services to the citizens. The Chinese e-government portal currently accounts for a user base of 29.21 million and offers services such as registering businesses, bill payments, and emergency response information.
- The online financial transactions carried through various financial applications are increasing potentially. WeChat and Alipay are the two preferred applications by users for conducting cashless payments in China. Almost 64% of the users in China have both applications to complete their financial transactions. Such factors are expected to drive the companies to keep their rack server allocation for the anticipated growth in the data from these transactions.
