After the UPS market returned to growth in 2016, momentum continued into 2017 as the market picked up steam, growing at a rate of 3.6% to just under $7.7 billion. The Americas region remained relatively flat in 2017; cloud and colocation growth was subdued as space and power continued to be leased from large buildouts which occurred in 2016. EMEA grew at mid-single digit levels due to widespread growth from cloud and colocation service providers, on-premises enterprise data center modernization and even industrial applications. Asia grew at the fastest rate, also due to a broad range of applications and end users, notably driven by local UPS suppliers such Huawei, Kehua, and Kstar. Global market growth is projected to continue in 2018 and through 2020, at rates of low to mid-single digits. The growth from cloud and colocation service providers will play a big role in that, as well as new trends developing in the data center industry that will affect the growth potential of the UPS market, such as distributed compute and lithium-ion battery adoption.
Distributed compute – Hybrid cloud and edge deployments
One factor impacting the UPS market is the trend towards more distributed compute. While enterprises are embracing the cloud for its economic benefits, scalability, and access to a wider set of tools, enterprises also learned they prefer to maintain specific applications, such as low latency, security sensitive and mission-critical applications, on-premises. In turn, cloud service providers (CSPs) have embraced this hybrid cloud architecture (enterprises using a mix of on-premises compute and off-premises cloud services) and released hardware and software to enable a more seamless integration of cloud services and on-premises compute. While a hybrid cloud architecture solves many problems of today’s latency sensitive applications, the exponential growth of data and connected devices present another challenge for future applications and data management. This is driving the need to push compute farther away from centralized data centers, closer to end users or devices at the edge of networks. IHS Markit defines edge-of-network data centers, or simply edge data centers, as small data centers (approximately 10–100kW IT load) geographically close to end users and intended to reduce latency, decrease network congestion, keep mission-critical applications on-premises, and/or act as a data-aggregation and content-caching point between a user and a central data center. Currently, there are a limited number of edge data center deployments but future edge application examples include artificial intelligence (includes machine learning), autonomous driving, 4K content streaming and augmented and virtual reality. The distributed compute trend is currently considered a boon to the UPS market. While data center consolidation under cloud and colocation service providers continues to be a trend, the emergence of distributed compute will provide growth to lower power rating segmentations of the market that had historically been contracting due to data center consolidation.
Lithium-ion battery adoption
Another trend in the UPS market is the growing interest in lithium-ion batteries in data center and UPS applications. A longer lifespan, smaller size and weight, ability to operate in a wider range of environments and favorable total cost of ownership (TCO) as compared to traditional lead acid batteries drives interest. This is leading to UPS suppliers providing both lithium-ion and lead acid battery quotes in 30% - 50% of new three-phase UPS deployments. However, lithium-ion batteries still have a relatively low adoption rate in the data center energy storage market.
One inhibitor to a greater adoption rate of lithium-ion batteries is their higher initial cost. Data center owners or service providers who had previously budgeted for lead acid batteries, may simply not have the budget to purchase the nearly twice as costly lithium-ion batteries. Second, the current sizing of available lithium-ion battery solutions is best suited for 100 kVA and up applications, limiting the potential available market for lithium-ion battery deployments. Lastly, a temporary supply-demand imbalance in 2018, caused by demand from electric-vehicle and grid connected energy storage applications (specifically government incentivized deployments in South Korea) are leading to longer lead times which are not suitable for data centers. However, these inhibitors are temporary and will be overcome in time as lithium-ion batteries in UPS applications mature. New suppliers are already making their way into lithium-ion battery UPS applications while end users are increasingly planning and budgeting for lithium-ion battery deployments. The supply-demand imbalance continues to be a near-term inhibitor, but is forecast to ease in late 2018 into 2019 as manufacturing capacity grows. In short, the data center energy storage revolution isn’t coming, it is here.
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 2017 and forecast through 2022. Supplier market shares and an analysis of the competitive environment are also provided.