Report: U.S.-China Trade War Could Further Hurt the Server Market

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Most U.S. tech companies that makes hardware have reason to be watching, if not worrying, about the ongoing trade conflict between the U.S. and China. Component manufacturers have seen already-reduced demand fall as their prices increase because of rising tariffs. Laptop and smartphone makers fear their products could be the next in line for those additional fees. And today DigiTimes reported that the conflict has impacted the server market as well.

"As suppliers for the cloud computing datacenter segment are still clearing their inventory, and U.S.-China trade tensions have created uncertainties, demand for datacenter servers has been decreasing since early 2019 and may cause Intel's datacenter business group to suffer its first on-year revenue decline in 10 years in 2019," today's report said.

DigiTimes said that the U.S. and China's back-and-forth has cost server companies in two ways. The first was the blacklisting of Huawei, said to be a major customer for Intel and Nvidia, on May 16. U.S. companies are allowed to work with Huawei until August 18 because the U.S. Bureau of Industry and Security issued a temporary license, but many companies have opted to sever ties with Huawei completely despite that concession.

Huawei's blacklisting having an effect on the server market doesn't come as much of a shock--many companies are expected to be negatively affected by losing it as a customer. Goldman Sachs said many U.S. companies will see their revenues drop as a result of the ban, with Broadcom, Qualcomm, Micron and Intel losing the most. DigiTimes' report simply makes it clear that Intel and Nvidia's server revenues specifically will be hurt.

The DigiTimes report also noted that, much like their counterparts in the component industry, server companies would be devastated by losing access to the Chinese market at large. "China reportedly plans to boycott products from U.S.-based chip suppliers including Intel," DigiTimes wrote. "China has contributed around a quarter of Intel data center business group's revenues." Losing that large a revenue source is bound to be problematic.

Like we said: not much of a surprise. But much like the component market, the server market was already experiencing some declines, which means tensions between the U.S. and China are exacerbating an existing issue. In the server market's case, DRAMeXchange predicted in April that the market would peak in 2020 as demand from Chinese companies dropped and growth among their North American counterparts failed to keep pace. That peak might come earlier than expected if China actually boycotts U.S. products.

On the other hand, the server market was already set to fall in the near future; concerns about the U.S.-China trade war might just accelerate that process. We should know more as companies start to release their earnings reports, but even then the conflict's true impact on the U.S. tech industry probably won't be quantified for a while after that.

Nathaniel Mott
Freelance News & Features Writer

Nathaniel Mott is a freelance news and features writer for Tom's Hardware US, covering breaking news, security, and the silliest aspects of the tech industry.