What is behind HPE reported call for switch to AMD?

Aaron Lee, Taipei; Joseph Tsai, DIGITIMES

HP Enterprise (HPE) has recently been said to have recommended its partners adopt its server products using AMD's platforms to avoid the impact of Intel processor shortages. But Digitimes sources from the upstream supply chain have indicated that no other server players have seen issues with supply of Intel's server processors.

HPE's reported message to its partners could be an indication of its strategy change.

According to IDC's latest server shipment figures for the second quarter of 2018, Dell surpassed HP to become the largest server brand worldwide with a market share of 19.5% and an on-year shipment growth of 16.6%. Third-placed Lenovo also saw an impressive 53.9% on-year growth in its second-quarter shipments. However, among the major server players, HPE was the only one with an on-year shipment drop of 12.4%, with its market share slipping from over 20% previously to only 15.1% in the quarter.

HPE had partnered with Foxconn Electronics (Hon Hai Precision Industry) to cross into the cloud computing datacenter server market, looking to offset the losses of orders from clients turning to use public cloud systems. But the two firms still parted ways after three years of cooperation without significant results. HPE has since been working alone in the cloud server market, but such a market is becoming competitive because of the arrival of many ODMs.

HPE has changed its focus to supplying solutions and services to second-tier cloud computing service providers. But with growing competition from several Taiwan-based ODMs, HPE, which has never been good at pricing competition, is likely to experience pressure.

But HPE has also been adjusting its server business direction: Instead of pushing shipment growths, the company is now more focused on creating added values to its server products to enhance its competitiveness. This partly explains why HPE's shipments dropped on year in second-quarter 2018.

Intel is currently the largest server CPU suppliers with a 95% market share. With such dominance, the CPU giant may adjust its supply priority to its partners according to their sales volumes, rather than the added value of their products offer.

It remains to be seen whether HPE's weakening performance has indeed resulted in the reported issues with supply of Intel CPUs.

But there have been attempts by others to break Intel's dominance, such as Qualcomm, AMD and IBM. HPE has recently partnered with the US Department of Energy to develop a new super computer, the Astra using Arm-based processors. And HPE's recommendation of AMD-based servers could very well be in line with such attempts.