ODM Sales Soar as Hyperscalers and Cloud Providers Go Direct

TechInsights’ 2023 server market analysis shows global spending of $120 billion on over 13.5 million servers, with Original Design Manufacturers (ODMs) now representing 40% of direct sales. This surge is fueled by cloud providers and hyperscalers like Amazon and Google, who are manufacturing their own chips to cut costs and gain a competitive edge. As of 2023, Google has become the third-largest designer of datacenter chips, highlighting the growing influence of hyperscalers in the semiconductor industry.

Despite the growth of ODMs, on-premises infrastructure is expected to continue dominating the market. Many enterprises prefer a hybrid approach, combining on-premises and cloud environments to maintain control over critical infrastructure while benefiting from cloud scalability and flexibility. Concerns over security, compliance, and control also drive organizations to own their servers, even in smaller quantities.

The rise in ODM sales underscores the changing dynamics in the server market, driven by hyperscalers' strategic innovations. While cloud solutions offer scalability and efficiency, the persistent preference for on-premises infrastructure ensures hybrid models will remain prevalent. The future server market will be shaped by this balance, with ODMs playing a key role in meeting the diverse needs of enterprises worldwide.