Despite the turmoil and uncertainty spurred by the pandemic, the broad HPC market finished 2020 at $38.9 billion in revenue, down just 0.2 percent from 2019. What’s more, HPC has returned to its growth track and is projected to reach $60 billion in 2025. While several HPC sectors slowed, surging government spending to fight the pandemic and ongoing supercomputer market strength helped prevent an HPC freefall. Notworthy, HPC-related cloud spending soared 78.8 percent and HPC storage nudged up slightly.
These are the key bullets presented by Intersect360 Research yesterday in a webinar to update the HPC market 2020 performance and outlook leading into next week’s ISC2021 conference. Not surprisingly, HPC market analysts have been hard-pressed to accurately forecast results during the pandemic. The essentially flat year – a pleasant surprise to many – follows Intersect360’s forecast of a 3.7 percent decline made in July. The slight overall worldwide HPC decline was the first since the 2009 recession.
Intersect360 co-founder and CEO Addison Snell said, “In my career as an analyst in this space, this is the most complicated market sizing exercise we’ve ever been through. And that is directly because of the COVID-19 pandemic which has effects this year [and] it has lingering effects into next year. There’s been a lot of work that’s gone into this both on the demand side with surveys on the supply side with analysis.”
Before digging into his talk, which reviewed many of the nuanced and conflicting forces at work in the HPC landscape, here are two of slides that capture the key messages.
A video of Snell’s talk, delivered with Intersect360’s chief research officer, Dan Olds, is available for watching on the Intersect360 Research website.
In brief, the lower end of the HPC market was hurt most last year, in part caused by the swing of business to the cloud which is the big winner in terms of structural market change. The academic (down 5.2 percent) and commercial sector (down 3.3 percent) took hits. Big systems spending – driven by exascale and pandemic-related spending – drove much of the market and dragged along storage which was resilient. AI, beyond being blended into those efforts, was less of a distinct factor.
The regional HPC picture was interesting. China/Asia-Pacific rebounded fastest from the pandemic and was up 7.9 percent, driven by both China’s economic rebound and spending on Japan’s Fugaku system (~$500-plus million). North America was down 3.2 percent and EMEA down 1.7 percent. The outlook for vertical markets is shown below.
To a significant extent, said Snell, the current downturn and expected rebound looks a lot what happened during that recession (2009).
““In year one, the recession comes in the market dips due to some projects canceling, but to a larger extent in HPC, due to delays in purchasing. What happens with the delayed purchases is that in year two you capture the sales that you would have had in year two, and also things that got delayed from year one,” said Snell. “Plus [because] some of the delays from year one that went into years two, year three and four you can have a little bit of extra wiggle. By the fifth year, you kind of get back to life as normal. A fundamental underlying premise of this is that HPC is a long sales cycle item.”
To accommodate the changing dynamics Interect360 issued a six-year forecast instead of the usual five, allowing it to smooth out the wiggles as the market returns to normal.
“We’re assuming right now, [that] most global economic activity is going to be pretty normal by the end of 2021. And we’re assuming that microprocessor shortages are not going to be as significant damper on the supply side of the HPC market within 2021. But we are continuing to monitor that and acknowledge that that is a significant risk. If that becomes a risk that we think are going to affect the server numbers for 2021, we will be back in touch with everyone by the end of the year,” said Snell, who also acknowledged continuing difficult-to-predict pandemic issues such as India’s ongoing pandemic surge.
Snell expects the market recover to ~ $60 billion in 2025 and that cloud segment will continue to grow at more than a 20 percent CAGR and hit $7 billion. Interestingly, Snell suggested the AI segment may begin splitting. AI adoption, of course, is a major dynamic in today’s server and software markets throughout all of computing.
“AI has been supporting the both the growth of HPC and cloud, and is something where people who have AI as part of their HPC budgets are seeing growth in those HPC budgets as a direct result of AI. And that budget effect is modeled into the near-term forecasts on the underlying growth rate in the long term. By the end of this forecast period, we could start to see a divergence of AI from HPC. Not that AI and machine learning won’t continue to have an effect within HPC. But we’re already seeing multiple users who are thinking of AI as being something truly different from HPC. And the types of configurations they want for them are going to be more different in the long term.”
Looking at how HPC server and storage vendors fared, Intersect360 reported little overall change.
Year over year, HPE and Dell both declined in proportion to the market, according to Intersect360, with Dell down slightly more than HPE. “But they are still the number one and number two vendors in the market and still represent about 60 percent of the market together overall, so not a big change in leadership,” said Snell.
Perhaps more interesting was the double-digit growth reported by Intersect360 for Atos and Inspur. “Inspur, in particular, is riding the wave of China doing well and this is the second consecutive year for double digit growth for Atos,” said Snell. IBM’s HPC server share “has been plummeting, due to just a shift in focus away from HPC with their Power [products].”
Intersect360 has pulled Supermicro out of the other category and now ranks it seventh on the HPC vendor share list. That understates its actual position said Snell, “[Identifying] Supermicro’s share gets complicated because less than half of its revenue for HPC comes from direct sales. It does a considerable amount of OEM business, and also through just reseller partners. So the Supermicro number you see here is their direct sales number that is less than half of their true revenue.” Broadly, HPC server sales were down ~7 percent.
The storage market was resilient, said Snell, “We did have some rearrangement of shares. EMC had a slight decrease, but it’s still a comfortable number one. HPE was flat [and] NetApp had slight growth, enough to overtake HPE to get back into the number two revenue share position that they had held previously.”
The big winners were DDN, Atos and Fujitsu which all experienced double-digit growth for the second consecutive year. “[It’s] really a triple win for DDN because of sales through Fujitsu (as part of Fugaku). Most intriguing here is Intel, which is really established now as a storage vendor with Optane and their DAOS products which are sold directly by Intel,” said Snell.
He emphasized that when Intersect360 presents HPC storage, “It’s a lot bigger than storage that is designed specifically for HPC with a parallel file system and other features you expect in high-end storage. There’s a lot of enterprise storage that gets purchased as part of HPC budgets. We presented that in our previous HPC technology survey and HPC budget map surveys, looking at how storage gets purchased, what proportion of the time it’s an enterprise purchase that’s driven from higher up in the organization just gets assigned and billed to the HPC budget.”
That’s what drives EMC and NetApp to the high positions that they’re in, Snell said. “There’s a lot more than just, say, Isilon. Dell’s number one position in HPC storage is really going to be from products like PowerVault, which are definitely targeting HPC, or a lot of all-flash products from both EMC and NetApp. There’s high usage in HPC for all of those things.”
Snell also noted that IBM’s storage business has been resilient. “It is down year over year, just because the server business for IBM did so poorly, they’re not getting any of that carry through. [However] IBM is going to be selling more of its Spectrum Scale storage through partnerships, for example, through HPE. IBM’s [overall HPC] share is going to continue to decline as long as their direct sales force is not focusing on HPC but their storage products, their software products, and their services are stronger in HPC than the server business overall. Lenovo is right in there still showing slight growth.”
Snell’s presentation coverage included far more detail around vertical markets, a few key technology trends (e.g. processor diversity), and economic modeling issues in uncertain times such as now.
Link to the latest Intersect360 Research presentations: http://www.intersect360.com/presentations