Nearly one in five Americans are now confined to their homes, not to mention other untold millions around the globe, as large swaths of the world engage in social distancing to stop the spread of COVID-19. That's putting an unprecedented strain on network infrastructure at every level, and that also equates to strain on servers used in the data center. That means that the supply of chips, long the backbone of the connected world, is incredibly pressing and we could see an increase in server and networking sales as the industry adjusts to handle the load.
Given the recent spate of chips shortages for both Intel and AMD, not to mention threats to their global supply chains, a sudden drop in chip supplies could exacerbate issues during what could be one of the most challenging times in recent history.
But according to AMD and Intel, which collectively power ~99% of the world's servers, both companies have adequate supply of processors and can meet the majority of demand, unlike more than a few other companies.
Intel's Bob Swan penned a letter reassuring the company's customers earlier this week, citing the company's experienced Pandemic Leadership Team that it established 15 years ago and its globally-distributed supply and manufacturing chains as key reasons the company is operating at nearly full capacity and maintaining a 90% on-time delivery rate.
AMD CEO Lisa Su also penned a letter to customers last week, delivered via its Meet the Experts network, stating that the company is actively working to maintain business continuity by mitigating the impact on the company's global operations, and also taking steps to assure the safety of its employees during the outbreak.
Notably, neither chip maker has adjusted its earnings guidance provided during their respective releases last month.
There's plenty of evidence of increased internet usage. AT&T's CEO stated yesterday on CNN that the company has seen WiFi calling increase by 100% in the early days of the new restrictions, Steam broke its concurrent user record again yesterday, Zoom outage reports have become common, and OpenVault (an internet intelligence agency) says there's been a 41.4% rise in home internet usage. Netflix and YouTube have throttled video quality to lessen the burden on infrastructure, all while some internet providers are loosening data caps to give customers access to more data.
The sudden explosion of working and schooling from home presents a new series of challenges. For instance, contrary to widespread belief, there is no shortage of food in the U.S. – there isn't a sudden explosion in the number of people that need fed. Instead, a large amount of the food supply chain is dedicated to restaurants and the like, so a high percentage of food comes in bulk packaging that isn't suitable for retail sales. Fixing that problem merely involves switching production lines to different packaging techniques and diverting supply chains to focus more on supermarkets, an effort that is currently underway. But food production doesn't necessarily have to increase.
Likewise, there isn't a sudden increase in the population to drive increased internet usage, but the problem is more complex than that faced by the food industry. Remote working and schooling requires increased bandwidth for video (good luck finding a webcam), and resources for collaborative services like Zoom and Slack require a new level of compute that simply hasn't been needed before. The internet, and the innumerable services tied to it, are creaking under the strain. That means there will likely be an increased need for critical infrastructure, such as servers, particularly as the scope of shelter-in-place orders inevitably widens.
Infrastructure providers may take a conservative approach to expansion, lest they be left with massive amounts of unneeded hardware when the pandemic subsides. But there could be increased demand for server chips on the near horizon, and addressing increased demand could mean Intel and AMD might have to divert more production to server chips as opposed to client processors. That might not be too big of a concern, as some analysts predict a sales decline of up to 30% for PCs.
We'll certainly need the critical supply of chips to continue flowing during the most severe pandemic in modern history.