Asia data center storage market experiences revenue surge in Q4 of 2019 to finish the year in positive territory

Asia-Pacific (APAC) data center (DC) storage equipment market revenue surged by 23 percent year-over-year (YoY) in the fourth quarter of 2019 as uncertainty surrounding the U.S.-China trade war began to dissipate, according to Omdia.

The strong fourth quarter storage increase changed APAC regional server external storage revenue in 2019 from being down year-over-year, to rising by 3 percent for the full year.

The leading DC storage suppliers in the region, Huawei, Inspur and Lenovo, attained combined revenue growth of 59 percent YoY in the fourth quarter, as reported by the latest edition of Omdia’s Data Center Storage Equipment Tracker. The strong increase represented a major turnaround from the 2 percent YoY increase in the first quarter of 2019.

“Excess purchasing of storage capacity in late 2018 and uncertainties concerning the U.S.-China trade war inhibited the growth of the DC storage market through the first half of 2019,” said Dennis Hahn, principal analyst Omdia. “However, during the second half, the poor macroeconomic conditions for DC storage dissipated. The uptick in APAC vendor revenue in the second half of 2019 was driven by enterprises and Chinese communications service providers (CSPs) taking advantage of favorable government economic policies and the easing of trade tensions.”

Government policies benefiting the market included a move by the Chinese government to gradually ramp fiscal and monetary stimulus to support regional growth.

For the total APAC data-center storage market,  server external storage revenue increased by 23 percent YoY in the fourth quarter of 2019, while unit shipments rose by 35 percent, reflecting a strong quarter to close out 2019, according to Omdia.

Dell EMC and Huawei tied for the No.-1 spot in APAC with 15 percent shares of the market. Dell EMC lost 13 percentage points of share compared to the fourth quarter of the previous year, while Huawei gained 5 points. Hitachi claimed the No.-3 spot with a 9 percent share in the fourth quarter of 2019, and Inspur took No.-4 spot with a 5 percent share. Lenovo didn’t make it into a top spot but did manage to grow 88 percent YoY in the fourth quarter in APAC.

Huawei and Inspur have steadily been building better storage software to be more competitive, since software functionality has been a barrier. This effort appears to be finally paying off. After struggling to find a storage strategy to take advantage of its server market strength, Lenovo appears to have solved this challenge by partnering with NetApp in an increasingly successful joint venture.

Chinese vendors progressing in DC Storage
Going forward, Omdia expects solid revenue growth in the APAC storage market driven by data demands as the world continues its progress into the information age. Omdia forecasts that in 2024, APAC storage revenue will expand at a 14 percent, five-year compound annual growth rate (CAGR) as the region continues to grow driven by demand from enterprises and CSPs for storage. The easing of trade tensions with the signing of the Phase 1 agreement between the U.S. and China should also provide a tailwind for growth in both APAC and North America.

In 2020, Omdia expects APAC vendors to continue to expand their shares of the global DC storage market. Interestingly, Huawei, Inspur and Lenovo increased their global share by addressing mostly the APAC and the Europe, Middle East and Africa (EMEA) regions, while taking less than a combined 1 percent share in North America in 2019. In Omdia’s current forecast, we estimate first-quarter revenue was down for APAC and second-quarter results will be down for North America, making for difficult vendor share comparisons across the globe in the first half of 2020.

Additional DC storage highlights from the Omdia report include:

• The global external DC storage market will expand to $78 billion in 2024, rising at a 12 percent CAGR from $45 billion in 2019.
• Array revenue was up 20 percent YoY in the fourth quarter of 2019; the all-flash performance category expanded by 11 percent YoY, while hybrid performance rose 22 percent and the capacity-optimized segment increased by 23 percent YoY.
• White-box vendors were still No. 1 in market share in the fourth quarter of 2019 at 37 percent. Dell EMC took the second-placed spot, with a 20 percent share. Huawei was in third place, with a 6 percent share, IBM moved up to the fourth spot, up from seventh place during the previous quarter.
• White box products will account for 28 percent of storage revenue by 2024, up from 25 percent in 2019; Open Compute Project (OCP) certified was 15 percent and traditional totaled 57 percent.
• Fibre Channel (FC) controller ports represented 22 percent of total controller ports in 2024, down from 25 percent in 2019; 32G FC accounted for 47 percent of the total FC ports, while 16G FC was at 46 percent of FC ports in 2019.