Austin, Texas (August 7, 2017) – After four straight years of decline for the uninterruptible power supplies (UPS) hardware market, 2016 proved to be the year the market returned to growth, at a rate of 1.6 percent to total $7.4 billion. North America and Asia’s markets grew at the fastest rates, led by large investment from colocation and cloud service providers. EMEA UPS revenues remained relatively flat in 2016, as colocation and cloud services providers grew their footprints while other segments of the market struggled. Latin America’s UPS market continued to contract in 2016, as the region’s markets struggle to overcome political corruption and economic uncertainty.
After the UPS market swelled to over $8 billion in 2011, the market began its contraction due to overcapacity, data center consolidation, server consolidation and disruptive design trends. These factors combined to the bottoming of the market in 2015 at $7.3 billion. Despite growth in the 2016 UPS market, these factors remain and continue to inhibit growth. At the same time, digitization continues unabated, and continues to largely be absorbed by colocation and cloud service providers. These factors accumulated to a historic year for colocation and cloud service providers spending on UPS systems, as they expanded their footprints in 2016 to meet this growing demand in compute. This claim is recognized by the significant double digit growth rates in larger three-phase power ratings most often used by colocation and cloud service providers throughout the globe.
Another trend witnessed in the 2016 UPS market was the garnered interest for lithium-ion batteries as a backup energy storage solution in data center applications. Lithium-ion batteries have been considered for data center applications for many years, but the high initial cost has been the primary inhibitor for adoption. With significant decreases in price in recent years, lithium-ion batteries are warranting more consideration. However, despite the recent decreases in price, lithium-ion batteries still carry a much higher total initial investment than traditional valve regulated lead acid (VRLA) batteries. But, for this higher cost, the benefits of lithium-ion, including higher energy density in a smaller footprint and a longer life cycle, lead to a total cost of ownership that is on par – if not less than – VRLA batteries in most instances. There are, however, concerns about safety, since lithium-ion batteries in other applications have been exposed to bad publicity for exploding or catching fire. Yet, the chemistries in those lithium-ion batteries are different than the ones that would be used in data center applications, which utilize a chemistry with a greater emphasis on safety at the expenses of even greater energy densities. With time and education, those concerns will ease, while lithium-ion batteries prices decline further. This will lead to slow adoption in 2017 and 2018, which will accelerate further in the years after.
With a historic year in the books for colocation and cloud service providers spending on UPS hardware, what does the future of the UPS market hold? The key to answering this question is in understanding the transition from enterprise-owned data centers to colocation and cloud services. IHS Markit currently estimates that approximately 40 percent of data center space reside in in the top 145 colocation and cloud service providers, and predicts that percentage to continue to grow. Digitization continues, with the number of internet users and internet connected devices growing rapidly, leading to increasing demand for compute. With colocation and cloud service providers best poised to meet those demands, 2016 may be a glimpse into what the future holds for the UPS market.
A full assessment of the UPS hardware market is available from IHS Markit in the UPS Intelligence Service. The UPS hardware research provides in depth analysis across five major regions: North America, Latin American, Western Europe, Rest of EMEA, Asia, and 29 country level or minor region segmentations. The research is further segmented by 12 power ratings, unit shipments, average sale price, topology, distribution channel, vertical markets, and applications. These statistics are estimated for 2016 and forecast through 2021. Supplier market shares and an analysis of the competitive environment are also provided.
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