IDC Global Server Market Tracking Report shows that in the first quarter of 2021, global server market vendor revenue increased by 12.0%, reaching US$20.9 billion, with shipments increasing by 8.3% year-on-year to 2.8 million units, of which China's server market revenue increase

(Report producer/author: CITIC Construction Investment Securities, Yan Guicheng, Wu Chaoze, Liu Yongxu)

1. Cloud computing investment forward-looking indicators have shown signs of improvement, and the market structure has undergone subtle changes

Since the second half of 2020, as the domestic epidemic has been effectively controlled, online demand has weakened, and cloud computing investment has declined accordingly. But it is worth noting that from the perspective of server-related chip shipments and mobile Internet traffic, cloud computing forward-looking indicators have shown a positive trend. The penetration rate of 5G is constantly increasing. The C-end and B-end application expansion will provide strong support for traffic growth. The "meta-universe" with VR/AR as the underlying layer is expected to lead the further explosion of traffic demand, and the digital transformation of enterprise is also expected to inject new development momentum into cloud computing. In addition to traditional cloud computing and Internet manufacturers, we also need to pay attention to the development of other cloud service providers such as telecom operators, and we cannot simply map the entire cloud computing industry based on the situation of individual cloud computing manufacturers. We believe that domestic demand for cloud computing is expected to gradually improve in the next few quarters, and investment in cloud infrastructure may gradually recover.

1.1 Intel's guidance is optimistic, Xinhua Technology's growth rate has increased, and server demand is expected to continue to improve

2021Q3, Intel data center chip business sales year-on-year and and month-on-month growth rates are both positive. It is expected that 2021Q4 will continue to maintain its prosperity. Intel Data Center Business Department (DCG) mainly provides products such as X86 server chips, and has a high market share. In 2021Q1, Intel data center business achieved revenue of US$5.6 billion, a year-on-year decrease of 20%, and in 2021Q2, achieved revenue of US$6.5 billion, a year-on-year decrease of 9%, and increased by 16% month-on-month. In the first half of 2021, the main reason for the decline in Intel's data center business was that cloud manufacturers digest inventory, and the competition for AMD was also fierce. In 2021Q3, Intel's data center business achieved operating income of US$6.5 billion, a year-on-year increase of 10%, shipments increased by 8% year-on-year and 6% month-on-month, showing relatively obvious signs of improvement.

Since August 2021, Xinhua Technology's monthly revenue has maintained a slight year-on-year growth trend under the high base in 2020. Xinhua Technology is the world's leading server BMC chip supplier with a market share of more than 70%. From January to July 2021, Xinhua Technology achieved operating income of NT$1.996 billion , a slight increase of 2.07% year-on-year. Sales remained high in August to December 2021, with year-on-year growth rates reaching 49.53%, 47.75%, 88.61%, 33.62% and 32.12% respectively, continuing to grow rapidly, indicating that the downstream server industry has good demand and is expected to maintain a high prosperity in the next few quarters.

The global server market is recovering, and the growth rate of China's server market exceeds the global level. IDC Global Server Market Tracking Report shows that in the first quarter of 2021, global server market vendor revenue increased by 12.0%, reaching US$20.9 billion, and shipments increased by 8.3% year-on-year to 2.8 million units, of which China's server market revenue increased by 29.1% year-on-year; in the second quarter of 2021, global server market revenue decreased by 2.5% year-on-year to US$23.6 billion, and shipments exceeded 3.2 million units, only 0.1% year-on-year, of which China's server market revenue increased by 3.4% year-on-year; in the third quarter of 2021, the global server market increased by 8.8% year-on-year to US$24.68 billion, and shipments increased by 9.6% year-on-year. Judging from IDC data, the global server market has recovered.

In the first and second quarters of 2020, the year-on-year growth rate of China's server market revenue was -1.1% and 41.4% respectively. The epidemic gave birth to an outbreak of the online economy, resulting in a rapid growth in the revenue of China's server market in the second quarter of 2020. The positive growth continued in the second quarter of 2021, indicating that downstream demand remained resilient. Combined with the significant improvement in the upstream server chip market, it is expected that China's servers will remain in a good trend in the second half of 2021. IDC expects that the size of China's server market will reach US$25.731 billion in 2021, an increase of 18.86% year-on-year, maintaining a rapid growth momentum.

1.2 North American cloud giant 2021Q3 Business revenue and capital expenditure growth strongly

North American cloud vendor business growth strongly.In 2021Q3, the total revenue of Amazon , Google , Microsoft and Facebook Facebook totaled US$250.257 billion, a year-on-year increase of 27.98%; in 2021Q3, the total capital expenditure of the four companies was US$32.69 billion, a year-on-year increase of 30.42%.

2021Q3, the capital expenditure of four cloud manufacturers in North America all achieved year-on-year growth. Since Amazon's year-on-year growth rate bottomed out in Q4 2018, the overall growth rate has increased quarter by quarter. Since Q1 2021, the growth rate has declined due to base reasons. Capital expenditure increased by 42.35% year-on-year and 10.22% month-on-month to US$15.748 billion, still maintaining a high level, accounting for 48.17% of the total capital expenditure of the four companies. We believe that this is related to the rapid development of AWS. In 2021Q3, AWS revenue was US$16.11 billion, a year-on-year increase of 38.87% and a month-on-month increase of 8.79%, a record high. Microsoft's cloud business revenue in 2021Q3 was US$16.964 billion, a year-on-year increase of 30.63%, a month-on-month decrease of 2.37%, and capital expenditure in 2021Q3 was US$5.81 billion, a year-on-year increase of 18.4%, a month-on-month decrease of 9.95%. Google's cloud business revenue in 2021Q3 was US$4.99 billion, a year-on-year increase of 44.89%, a month-on-month increase of 7.82%, and capital expenditure in 2021Q3 was 6.819 billion, a year-on-year increase of 26.14%, a month-on-month increase of 24.07%. Facebook's revenue in 2021Q3 was US$29.01 billion, a year-on-year increase of 35.12%, a month-on-month decrease of 0.23%, and capital expenditure in 2021Q3 was US$4.313 billion, a year-on-year increase of 16.92%, and a month-on-month decrease of 6.48%.

According to the third-quarter performance guidance, the revenue of four cloud manufacturers in North America is expected to maintain a rapid growth momentum, and cloud infrastructure will continue to be invested. Among them, Amazon expects revenue in the fourth quarter to be between US$130 billion and US$140 billion, a year-on-year increase of 4%-12%. Microsoft's cloud business expects revenue to be US$18.1 billion to US$18.35 billion in the fourth quarter, a year-on-year increase of 24.82% based on the median US$4.18.225 billion. Google is confident about future cloud business growth, saying that Google Services and Google Cloud's employee population will continue to grow strongly in the fourth quarter. Facebook expects that the company's revenue will be uncertain in the second half of the year due to changes in Apple iOS14. It is expected that the total revenue in the fourth quarter of 2021 will be between US$31.5 billion and US$34 billion, and the capital expenditure in 2021 will be approximately US$19 billion, updating the previous estimate of US$19 billion to US$21 billion, mainly investing in data centers, servers, network infrastructure and office facilities. It is expected that capital expenditure in 2022 will be between US$29 billion and US$34 billion, which will increase by at least 52.63% from 2021, or even up to 78.95%.

According to IDC's forecast, in China's public cloud market has performed well in product innovation, business model, and industry depth expansion. It is expected that by 2024, the global share of China's public cloud service market will increase from 6.5% in 2020 to more than 10.5%. We believe that North America is still the region with the best development of the global cloud computing industry. Judging from the current revenue and capital expenditure of the four major cloud vendors and future guidance, the current demand growth momentum of the cloud computing industry is good, and China, as the second pole of the global cloud computing industry, is also worth looking forward to in the future development.

1.3 China's cloud computing investment is expected to recover, but the market structure has undergone subtle changes. Operators have increased their investment in

1.3.1 Cloud vendor investment is correlated with traffic growth rate. The increase in 5G penetration will drive traffic growth

Looking back on history, we found that changes in mobile Internet traffic are related to investment in cloud infrastructure. For example, starting from Q3 2018, with the decline in the growth rate of mobile data traffic, the year-on-year growth rate of capital expenditure for Alibaba purchasing equipment has also gradually declined. Since Q4 2019, the growth rate of mobile data traffic has stabilized. Coupled with the epidemic factors in 2020, the outbreak of the online economy, Alibaba's capital expenditure has increased rapidly year-on-year. The

5G package users have exceeded 700 million, with a penetration rate of about 43%. As of the end of November 2021, China Mobile's 5G package users had reached 374 million, China Telecom's 5G package users reached 179 million, and China Unicom's 5G package users reached 150 million, with a total number of users reaching 703 million.

Domestic 5G mobile phone shipments account for more than 80% of the 2 consecutive months. From January to December 2020, the domestic shipment of 5G mobile phones was 266 million, accounting for 75.9% of the domestic mobile phone shipment.From November to December 2021, domestic 5G mobile phone shipments were 28.97 million and 27 million, respectively, accounting for 82.2% and 81.5% of mobile phone shipments during the same period. As of the end of November, the number of 5G mobile terminal connections in China reached 497 million, with a penetration rate of 30.2%, laying the foundation for the development of 5G applications.

With the increase in the penetration rate of 5G users, from January to November 2021, my country's cumulative mobile Internet traffic reached 200.8 billion GB, a year-on-year increase of 34.3%, and it still maintained a relatively high growth level. In November 2021, the average mobile Internet access traffic for households reached 14.02GB/account that month, an increase of 20.4% year-on-year, 2.1GB/account higher than the end of 2020. We believe that the DOU of 5G users in South Korea is about three times that of 4G users. The increase in the penetration rate of 5G in my country will make traffic growth sustainable. Coupled with the promotion of "Gigabit Home Furnishing" network, it will give birth to new applications and promote further accelerated data traffic.

We expect that the penetration rate of 5G package users in my country will exceed 45% by the end of 2021, and the growth rate of mobile data traffic is expected to increase. With the further increase in the demand for traffic in the future development of 5G applications (such as cloud VR/AR, high-definition live broadcast, etc.), coupled with the acceleration of enterprise digital transformation, the Internet of Things (such as intelligent connected vehicles) will accelerate development, which will have strong support for the demand for cloud computing, and thus promote the gradual growth of cloud computing infrastructure investment in .

1.3.2 The pattern of China's cloud computing market has changed, and it cannot be simply mapped with the situation of individual cloud manufacturers. The cloud industry is

According to the latest data released by IDC, the market size of China's IaaS+PaaS was RMB 61.1 billion, a year-on-year increase of 49%. 2021H1 Alibaba Cloud business revenue grew by 33.09%, which was lower than the overall market growth rate. Judging from the market share of in 2021H1, Alibaba Cloud's market share is 37.9%, Tencent Cloud and Huawei Cloud are both 11%, and Tianyi Cloud is 8%. In the second half of 2018, Alibaba Cloud's market share was 42.7%, Tencent Cloud's 11.8%, Tianyi Cloud's 7.5%, and Huawei Cloud's just started. At the same time, ByteDance has begun to fully enter the cloud computing market, and the " Volcano Engine " department will release cloud computing IaaS services. We believe that as companies such as telecom operators, , Huawei , ByteDance and other companies increase their investment in cloud services, the growth rate and investment of traditional Internet leading manufacturers' cloud services cannot fully represent the overall situation of the industry, and the market structure has begun to undergo subtle changes.

The three major telecom operators achieved rapid growth in 2020 and the first half of 2021, and will continue to increase investment in the future. In 2020, China Telecom, China Mobile and China Unicom's cloud businesses achieved revenue of 11.2 billion yuan, 9.2 billion yuan and 3.8 billion yuan, respectively, an increase of 58.0%, 360.0% and 62.7% respectively. At present, telecom operators continue to increase their investment in cloud computing. For example, China Telecom plans to invest 450.7 billion yuan in the cloud network integration new information infrastructure project, and build about 308,000 servers according to the hierarchical structure of "2+4+31+X+O", and build about 86,000 racks in key areas such as Beijing-Tianjin-Hebei, Yangtze River Delta , Guangdong, Hong Kong and Macao, Sichuan, Chongqing and Shaanxi, and fully implement the "cloud transformation and number transformation" strategy. In 2021H1, China Telecom, China Mobile and China Unicom's cloud business revenue was RMB 10.3 billion, RMB 9.7 billion and RMB 2.8 billion (mainly IaaS revenue), respectively, an increase of 122%, 118.1% and 38.9% respectively. (Report source: Future Think Tank)

In the process of moving from consumer Internet to industrial Internet, large and medium-sized enterprises will take the lead in launching digital transformation. Operators have unique advantages in developing cloud computing services: First, network coverage advantages. Operators can provide nationwide wired/wireless network coverage, which can meet the extension and expansion of cloud to the edge, ensuring that the "network moves with the cloud."In addition, operators can also provide customers with flexible network bandwidth adaptation to ensure users' demand for transmission rate; second, security and trustworthiness advantages, data security issues are issues that enterprises need to consider when going to the cloud on IT, and telecom operators with central enterprise backgrounds have higher social awareness and credibility, and have advantages in customer acquisition (especially government customers); third, service advantages, in terms of service capabilities, operators have a localized service team and support capabilities, and can respond to customer needs in a timely manner, which is particularly critical for government and enterprise customers with higher requirements for service quality and response quality. We believe that in the era of cloud and network integration, telecom operators will have more development opportunities in the cloud computing market. Therefore, behind the rapid development of telecom operator cloud computing business, it is the continuous increase in investment in cloud computing. For example, China Mobile's server demand has continued to grow in recent years.

Therefore, we believe that the pattern of China's cloud computing market is undergoing subtle changes. At the same time, as the country's emphasis on information security and data governance continues to increase, cloud computing manufacturers with state-owned backgrounds and Huawei Cloud are also expected to usher in greater development opportunities. Therefore, although we have observed that the overall decline in capital expenditure scale of Alibaba and Tencent in 2021, the guidance for 2022 is not clear at present, we believe that judging from the development of cloud computing business of the three major domestic operators, coupled with the recent operators' outlook guidelines for 2022, they all reminded them to increase investment in cloud computing.

Therefore, we suggest that the market cannot focus on Alibaba and Tencent’s capital expenditures with a traditional perspective, and its vision can be opened. Against this background, we believe that with the full rollout of the construction of the domestic digital economy, domestic cloud computing infrastructure investment is expected to return to the growth channel again, which is worthy of attention.

1.3.3 Policies strive to promote the development of the digital economy. Cloud computing, as the underlying infrastructure, is expected to increase investment in

On January 12, 2022, the State Council issued the "14th Five-Year Plan for Digital Economy Development", which involves optimizing and upgrading digital infrastructure, giving full play to the role of data elements, vigorously promoting industrial digital transformation, accelerating the promotion of digital industrialization, and strengthening the digital economy security system. The document clearly states that the penetration rate of industrial Internet platform application in 2025 will reach 45%, an increase of 30.3pp from 2020. The application penetration rate of industrial Internet platforms is used as a comprehensive evaluation indicator, including "equipment cloud, business cloud, industrial APP application and innovation, border cloud collaboration", etc. The document also emphasizes the need to promote enterprises to go to the cloud. We believe that whether it is the application of industrial Internet platforms, enterprises going to the cloud, or establishing a data element market, its underlying layer is inseparable from cloud computing, and it is particularly expected to promote the development of private cloud and hybrid cloud , which will promote further investment in domestic cloud computing infrastructure.

2. Policy guides supply-side reform of the IDC industry, and existing advantages IDC suppliers may benefit from

In 2020, the new crown epidemic stimulated the demand for cloud in the short term, and server growth drove IDC demand. IDC, as an important part of new infrastructure, has high enthusiasm for market investment, and IDC supply has grown rapidly, resulting in a situation of oversupply in the short term. Against the background of rapid growth of the digital economy and " carbon neutrality ", it is imperative to guide the rational layout of data centers and move towards green, energy-saving and efficient development. The IDC industry will carry out supply-side reforms. Specifically, first, the national layout of IDC will be optimized, and a national hub node for integrated computing power network will be built. Second, the supply of IDCs in popular cities may be further compressed. Third, the old IDCs will be cleaned up. Fourth, the direct connection network of data centers is expected to accelerate construction, thereby reducing the delay of data centers.

2.1 National computing power network is coordinated construction, and data centers accelerate supply-side reform

In May 2021, the National Development and Reform Commission, Cyberspace Affairs Office , the Ministry of Industry and Information Technology, and the Energy Bureau jointly issued the "Hydraft Implementation Plan for the Computing Power Hub of the National Integrated Big Data Center Collaborative Innovation System ", which clearly proposed to layout the national computing power network national hub nodes, launch and implement the "East Digital and West Computing" project, and build a national computing power network system.

2.1.1 There are problems such as supply and demand imbalance and disorderly development of data centers in my country. The supply of IDC in popular cities will be compressed.

In the eastern part of my country, the application demand is large, but the energy consumption indicators are tight and the power costs are high. It is difficult and limited to large-scale development of data centers; in the western part, the western part is rich in renewable energy and the climate is suitable, but there are bottlenecks such as small network bandwidth and high cross-provincial data transmission costs, and it is impossible to effectively undertake the demand in the eastern part.

According to the data of the "National Data Center Application Development Guidelines" issued by the Ministry of Industry and Information Technology, among the number of racks calculated in my country in 2019, the number of in the Beijing-Tianjin-Hebei, Yangtze River Delta, Greater Bay Area, Greater Bay Area, and Chengdu-Chongqing area was 1.64 million, and 340,000 in Guizhou, Inner Mongolia, Gansu and Ningxia area was 340,000, indicating that the current data center construction is mainly concentrated in the eastern region, but the resources in the core area are already relatively tight. It is necessary to guide the gathering of resources rich in western areas and areas surrounding first-tier cities that are appropriately distanced from, so as to achieve orderly development of data centers.

The annual electricity consumption of data centers in my country has accounted for about 2% of the total electricity consumption in the society. In order to ensure the goal of " carbon peak and carbon neutrality", it is necessary to further tap the potential of energy conservation and emission reduction in data center construction models, technologies, standards, and renewable energy utilization. Many places have proposed planning solutions for the green and low-carbon development of data centers. Beijing issued the "Implementation Plan for the Coordinated Development of Data Centers in Beijing (2021-2023)", proposing to orderly close and vacate low-utilization data centers, and the construction of new cloud data centers emphasizes "green", with PUE not higher than 1.3, and the power of cabinets used for data storage functions shall not exceed 20%; in April this year, the Guangdong Provincial Energy Bureau issued the "Notice on Clarifying the Related Requirements for Energy Consumption Guarantee of Data Centers in the Province", which clearly proposed "using market and administrative means to promote green and low-carbon development", requiring increased efforts to transform energy-saving technology, and PUE dropped below 1.3 during the "14th Five-Year Plan" period; Shanghai proposed in the three-year action plan for information infrastructure released in 2019 that the PUE of the new data center is limited to below 1.3, and the PUE of the existing data centers shall not be higher than 1.4.

In this regard, we believe that, first, most small and medium-sized IDC service providers have limited capabilities in the design, construction and operation and maintenance of green data centers, and it is difficult to meet the energy consumption requirements of PUE below 1.3; second, resources in the core area will become increasingly scarce; third, the main method to reduce PUE is to improve the working efficiency of the temperature control system, and air-conditioning units will be transformed from air-cooled and water-cooled to frozen water-cooled and dual-cold source types, and liquid cooling technology will gradually be popularized in the future.

2.1.2 my country will build a national hub node for integrated computing power network, and build a direct connection network for data centers

" National Integrated Big Data Center Collaborative Innovation System Computing Power Hub Implementation Plan " focuses on major national regional development strategies, and based on energy structure, industrial layout, market development, climate and environment, it will build a national hub node for national integrated computing power network in Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area , Chengdu and Chongqing, Guizhou, Inner Mongolia, Gansu, Ningxia and other places, guide the intensive, large-scale and green development of data centers, and build a data center cluster. The network transmission channels will be further opened between national hub nodes, accelerate the implementation of the "East Digital and West Calculation" project, and improve the level of cross-regional computing power scheduling.

According to the requirements of the "Implementation Plan for the Computing Power Hub of the National Integrated Big Data Center Collaborative Innovation System", the Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, Chengdu-Chongqing and other nodes have large user scale and strong application demands. We must focus on coordinating the layout of data centers within and around the city, optimizing the supply structure of data centers, expanding the space for computing power growth, meeting the needs of major regional development strategies, and accelerating the transformation and upgrading of existing data centers within the city, giving priority to meeting business needs with high real-time requirements.Guizhou, Inner Mongolia, Gansu, Ningxia and other nodes have rich renewable energy, suitable climate, and great green development potential for data centers. We must focus on improving the quality and utilization efficiency of computing power services, give full play to resource advantages, consolidate network basic guarantees, and actively undertake non-real-time computing power needs such as back-end processing, offline analysis, storage and backup across the country, and create a non-real-time computing power guarantee base for the whole country.

In order to realize the national hub node layout of the national integrated computing power network, it is necessary to establish a direct network of high-speed data centers between the clusters, build a new computing power network pattern guided by data flow, help implement the "East Digital and West Computing" project, and support large-scale computing power scheduling. From the perspective of the generation of data center network delay, it is mainly divided into transmission delay (constrained by physical distance) and transmission node delay (constrained by the number of nodes and single-node forwarding delay). The method to reduce long-distance transmission delay is mainly routing optimization and providing shorter optical cable routing. Traditionally, my country's communication network is mainly built around the degree of population concentration. network nodes are generally concentrated in first-tier cities such as Beijing, Shanghai and Guangzhou. Data centers are highly dependent on the network, and are subsequently concentrated in urban deployment. To promote the "East Digital and West Calculation" project, we must promote the construction of network integration, consolidate the basic network guarantees in the western region, build a direct connection of data centers around clusters, increase network bandwidth, increase transmission speed, reduce transmission costs, and promote the construction of new Internet exchange centers, and Internet backbone direct connection points.

2.2 The data center industry will develop in an orderly manner, and companies with advantages in IDC resources are expected to benefit

In July 2021, the Ministry of Industry and Information Technology issued the "Three-Year Action Plan for the Development of New Data Centers (2021-2023)", proposing to basically form a new data center development pattern with reasonable layout, advanced technology, green and low-carbon, and computing power scale is compatible with the growth of the digital economy. With the rapid development of new generation information technology such as , , etc., and the digital economy is booming, data centers have become an indispensable key infrastructure for economic and social operation. Compared with traditional data centers, new data centers have the characteristics of high technology, high computing power, high energy efficiency, and high security.

At present, my country's data centers are facing problems such as poor layout and construction, insufficient computing power and calculation efficiency, insufficient energy utilization, and low technical level. It is urgently necessary to guide traditional data centers to evolve into new data centers with high technology, high computing power, high energy efficiency and high security characteristics. The Action Plan classifies and guides national hub nodes, provincial data centers, edge data centers, old data centers and overseas data centers, and strives to promote the formation of a staggered layout of data centers. At the same time, the computing power indicator EFLOPS is introduced for the first time to evaluate the quality of data center development, aiming to guide the data center from extensive rack scale growth to high-quality development of to improve computing power, and better promote the quality and efficiency changes of data centers.

The Action Plan proposes that by the end of 2021, the average utilization rate of data centers across the country will strive to increase to more than 55%, and the total computing power will exceed 120 EFLOPS (10 billion sub-level); by the end of 2023, the average annual growth rate of data center rack scale in the country will remain at around 20%, and the average utilization rate will strive to increase to more than 60%, and the total computing power will exceed 200 EFLOPS, the proportion of high-performance computing power reaches 10%, and the proportion of computing power of national hub nodes exceeds 70%.

In 2019, the proportion of national hub node computing power was about 69% (calculated by the number of racks), and is expected to be about 66% in 2020. The Action Plan proposes that the proportion of national hub node computing power was more than 70% by the end of 2023, with a proportion increase of 6.1%, significantly lower than the average annual growth rate of national data center rack size of more than 20%. At the same time, according to data from the Ministry of Industry and Information Technology, the frame size of the Beijing-Tianjin-Hebei, Yangtze River Delta, Greater Bay Area and Chengdu-Chongqing region in 2019 was 1.64 million, and 340,000 were in Guizhou, Inner Mongolia, Gansu and Ningxia. In combination with the planning schemes for the green and low-carbon development of data centers in many eastern regions, we expect that the increase in the scale of national hub node computing power will be mainly in Guizhou, Inner Mongolia, Gansu and Ningxia regions in the future. The increment in the eastern front-line regions will be very limited, and more will be based on digesting stock indicators and upgrading and renovation of old computer rooms.

The domestic IDC market has grown rapidly, and in recent years, the supply side has shown a rapid expansion trend. China Institute of Information and Communications Technology data shows that the global traditional IDC (including bandwidth rental, excluding cloud) market size in 2019 was US$56.6 billion, a year-on-year increase of 10.4%, and is expected to reach US$62.7 billion in 2020, a steady growth. In 2019, the market size of China's traditional IDC was 87.8 billion yuan, a year-on-year increase of 33.85%, and the compound growth rate in the past three years was about 26%. It is expected that it will continue to grow rapidly in the future. It is expected that the market size will reach 116.75 billion yuan and 150 billion yuan in 2020 and 2021, respectively, with year-on-year growth rates of 32.9% and 28.48% respectively.

global data center scale has grown steadily overall, and my country has shown a rapid improvement trend. Data from the China Institute of Information and Communications Technology shows that according to the average cabinet power of 6KW, the global data center racks were 7.5 million in 2019, an increase of 4.3% year-on-year, and maintained a steady growth trend in recent years; according to the average cabinet power of 2.5KW, as of the end of 2019, the total scale of data center racks in use in my country was 3.15 million, with an average growth rate of more than 30% in the past five years. Large and above data centers have grown rapidly, with more than 250, and the rack scale has reached 2.37 million, accounting for more than 70%. More than 180 large and above data centers are planned to be built, with more than 3 million rack scales, maintaining a sustained growth momentum. The China Academy of Information and Communications Technology expects that my country's data center industry investment may reach 1.4 trillion yuan in the next three years.

In my country's IDC market, telecom operators occupy a major share, and third-party IDC service providers expand rapidly. At present, telecom operators and third-party IDC service providers are still the main players in my country's data center industry. According to statistics on the number of cabinets, as of the end of 2020, it is estimated that the three major telecom operators will account for about 53% of my country's IDC market, of which China Telecom accounts for about 21%, and China Mobile and China Unicom are about 18% and 14% respectively.

Starting from 2018, there are a large number of racks under construction in Hebei Province, Inner Mongolia, Shanghai, central and western regions. According to the Ministry of Industry and Information Technology's "National Data Center Application Development Guidelines (2019)", it is estimated that the number of racks in use in 2020 will be 696,000, an increase of 87% over 2018; Shanghai and surrounding areas (including Zhejiang and Jiangsu) will have 860,000, an increase of 49% over 2018; Guangdong and surrounding areas (including Fujian and Hainan) will have 464,000, an increase of 27% over 2018; 's has 700,000, an increase of 67% over 2018, and Western areas will have 710,000, an increase of 54% over 2018. (Report source: Future Think Tank)

According to the computer room construction plan announced by IDC suppliers, a certain number of cabinets will still be placed in the first-tier and front-line areas such as Beijing, Shanghai, Guangzhou and Shenzhen in the next 1-2 years, which may put pressure on the market in the short term, but in the long run, the resources in the core area tend to tighten, and the location endowment factors of IDC computer room still have significant advantages.

3. The global cloud computing market is still in an upward period, and my country's cloud computing market is growing faster

Enterprises are going to the cloud. Cloud computing adopts virtualization technology to greatly improve the utilization rate of servers and storage, and has the advantages of flexible configuration, on-demand services, low prices, and simple operation and maintenance. Cloud computing reduces costs and increases efficiency significantly. 95% of enterprises believe that using cloud computing can reduce the IT costs of enterprises, of which more than 10% of users save more than half of the cost. In addition, more than 40% of enterprises said that using cloud computing has improved IT operation efficiency, with the reduction in IT operation and maintenance workload and the increase in security respectively 25.8% and 24.2% respectively. It can be seen that cloud computing will become a key element in enterprise digital transformation.

Global cloud infrastructure expenditures account for the proportion of enterprise IT infrastructure expenditures continue to increase. The COVID-19 pandemic has caused major adjustments in business, education and social activities and has affected the IT infrastructure structure. In the second quarter of 2020, spending on public cloud IT infrastructure increased by 47.8% year-on-year to $14.1 billion, surpassing the level of non-cloud IT infrastructure for the first time; in the third quarter of 2020, spending on public cloud IT infrastructure increased by 13.1% year-on-year to $13.3 billion, and non-cloud IT infrastructure spending returned to its highs to $13.7 billion.According to IDC's forecast, public cloud IT infrastructure spending will soon exceed non-cloud IT infrastructure spending again and expand its lead. It is expected that public cloud IT infrastructure spending will be approximately US$52.7 billion in 2020, accounting for approximately 39%. The hardware infrastructure market has reached a turning point, and the cloud environment will account for an increasingly large share of overall spending. In the long run, IDC expects spending on cloud IT infrastructure to grow at a CAGR of 10.6% to reach USD 110.5 billion by 2024, accounting for 64.0% of total IT infrastructure spending. Spending on non-cloud IT infrastructure will rebound after 2020, but the share will decrease.

20 The growth rate of the global cloud computing market slowed down, and the domestic market rose against the market. In 2020, the global economy shrank significantly due to the impact of the epidemic, and the online economy stimulated the demand for cloud computing, but the growth rate of the global cloud computing market still slowed down. According to statistics from the Institute of Information and Communications Technology, the global market size represented by IaaS, PaaS and SaaS in 2020 was US$208.3 billion, with a growth rate dropping to 13.1%, a year-on-year decrease of 7.8 percentage points; my country's economy rebounded rapidly after being impacted by the epidemic, and the cloud computing market showed explosive growth, with the annual market size reaching 209.1 billion yuan, a year-on-year increase of 56.6%, of which the public cloud market size was 127.7 billion yuan, a year-on-year increase of 85.2%, and the private cloud market size was 81.4 billion yuan, a year-on-year increase of 26.1%.

The domestic IaaS and PaaS market size has grown rapidly. In 2020, the domestic public cloud SaaS market size was 27.8 billion yuan, a year-on-year increase of 43.1%. The epidemic has stimulated the online economy to promote the market cultivation of SaaS services. It is expected that the market size will continue to grow rapidly in the future; the PaaS market size was 10.3 billion yuan, a year-on-year increase of 145.3%; IaaS is still the main component of the domestic public cloud market. In 2020, the market size reached 89.5 billion yuan, a year-on-year increase of 97.8%, accounting for 70%.

The global and Chinese public cloud market industry structure has basically taken shape. In the cloud computing market, the Matthew effect of IaaS and PaaS is obvious, and large manufacturers have great cost advantages, resulting in a clear trend of concentration of these two types of services to the top. Taking the IaaS market as an example, according to IDC statistics, the global IaaS market size reached US$67.19 billion in 2020, an increase of 33.9% year-on-year. The top five manufacturers are AWS, Microsoft, Alibaba, Google, and IBM, accounting for 77.1% of the market share.

China's cloud computing development level still has a big gap compared with the world, and there is a lot of room for improvement. According to statistics from Gartner and the China Academy of Information and Communications Technology, the global public cloud market size accounted for 6.97% of global IT expenditure in 2020, and the domestic public cloud market penetration rate was 4.5%, which still widened the gap compared with the global level. Compared with leading cloud manufacturers in China and the United States, Alibaba Cloud's revenue in 2020 was 55.6 billion yuan, while AWS's net sales during the same period were US$45.4 billion, and Alibaba Cloud's revenue was only about one-fifth of AWS; in terms of market share, AWS's global market share in 2020 was 46.8%, Alibaba Cloud's market share was only about one-sixth of AWS. The United States and China are the two poles of global IT and the Internet. Although China's cloud computing started later than the United States, it has developed faster and has an IT and Internet environment of comparable size as the United States. China is expected to become the second pole of global cloud computing development.

According to the forecast of the China Academy of Information and Communications Technology, with the economic recovery, the global cloud computing market growth rate will rebound, and by 2025 the market size will exceed US$600 billion, with a 5-year compound growth rate of 23.56%; my country's cloud computing market will continue to maintain a rapid development trend, and the market size is expected to exceed 1 trillion yuan in 2025, with a 5-year compound growth rate of more than 36%.

4. Focus on the left-side layout opportunities brought by marginal improvement of the industry

Since 2021, domestic Internet companies have been strictly regulated, and demand may slow down, but we believe that the policy direction is gradually becoming clear and market expectations have almost bottomed out. The policy has strengthened the supervision of the Internet industry. The market believes that the development of the consumer Internet industry and the demand for cloud computing may slow down. Internet background cloud manufacturers such as Alibaba Cloud may encounter difficulties in their business development.

In the medium and long term, IT is in the general trend of cloud access. As a medium and long-term growth industry, cloud computing remains optimistic about the demand for cloud infrastructure. The slowdown in demand since the second half of 2020 is just an adjustment of the "inventory" of cloud manufacturers. Waiting for "inventory" to be cleared and traffic increases, the growth rate of cloud infrastructure Capex is expected to rebound significantly, and the main entities of capital expenditure will also be more diversified. The epidemic in 2020 stimulated cloud demand and concentrated outbreaks in the short term in the first half of 2020. New infrastructure promoted the rapid growth of IDC supply, which also led to a slowdown in the short term and a decline in prices. However, in the context of carbon neutrality (computing power hub, new data center development action plan and other policies have been released one after another), it is imperative to promote the high-quality development of green energy conservation in data centers, and the IDC industry is undergoing supply-side reform.

(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original text of the report.)

Selected report source: [Future Think Tank] . Future Think Tank - Official Website