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Sales of data center power and cooling equipment and other physical infrastructure saw strong growth during the first quarter of 2023, according to a new analyst report by the Dell’Oro Group. The sales momentum is expected to continue through the year thanks to heavy demand and easing supply chain constraints
Revenue for data center physical infrastructure (DCPI) increased for the fifth straight quarter, growing 18% year-over-year to reach $6.1 billion in sales during Q1 2023.
For the full year, revenue is expected to grow 12% year-over-year and reach $26.7 billion in sales in 2023 with uninterruptible power supplies (UPSes) and thermal management solutions making up half the revenue, said Lucas Beran, research director of the Dell’Oro Group and author of the report.
Beran cites three reasons for the revenue growth. First, vendors began to see supply chain improvements during the 2022 fourth quarter and those improvements have continued into 2023, enabling the companies to begin to work through their backlog of orders, he said.
“Easing supply chain constraints are enabling DCPI vendors to manufacture and ship more products, and lead times are starting to come down,” Beran told Data Center Knowledge in an interview.
The second factor that Beran believes has led to strong revenue growth is that the DCPI vendors have increased their prices as they pass on the higher costs of raw materials, components and logistics to their customers.
Third, cloud and colocation service providers – the primary drivers of growth in this market – continue to expand their global data center footprints to meet high demand, while enterprises are right-sizing and modernizing their on-premises data center infrastructure, Beran said.
“The market remains incredibly healthy,” he said.
Sales grew across all physical infrastructure product lines in Q1 2023, but thermal management and cabinet power distribution and busway saw the fastest growth rates with a more than 30% revenue increase year-over-year thanks to easing fan and breaker supply chain constraints, Beran said.
Rack power distribution sales grew 20% during the quarter, while UPS and software and services sales grew in the mid-teen rates. IT racks and containment solutions saw the slowest growth rate (4% year-over-year), which was mostly due to a slowdown in server sales, he said.
AI Workloads Can Power Next Wave of Physical Infrastructure Growth
The popularity of ChatGPT is inspiring enterprises to begin to build their own generative AI applications. As a result, that can generate a new surge in physical infrastructure sales, Beran said. Sales from these AI projects could come late in 2023, but more likely in 2024 or even 2025, he said.
“It creates a significant, long-term opportunity for data center physical infrastructure,” he said.
In fact, while liquid cooling accounted for less than 5% of thermal management revenue in 2022, sales are expected to accelerate in the second half of 2023 and into 2024. “This growth is supported by increasing deployments of high-end processors – CPUs and GPUs – running applications like generative AI,” Beran said.
Vertiv Gains Market Share
Schneider Electric remains the No. 1 market share leader in the DCPI space, but Vertiv has seen strong growth over the past two quarters, partly because of the improved supply chain and partly because Vertiv is a leader in thermal management solutions, which is the fastest growing segment of the market, Beran said.
“The gap between Schneider Electric and Vertiv is shrinking,” he said.
Eaton, Huawei and Legrand round out the top five market share leaders. Meanwhile, Mitsubishi Electric also made some inroads in market share because it is a leader in large 3-Phase UPS systems, he said.
