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Assessing the State of Data Center Supply Chains in H2 2024
The data center supply chain is showing signs of improvement, but it still faces significant challenges. Explore the current trends and issues shaping the industry.
3 Min Read
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The data center supply chain has improved compared to a year or two ago, but significant challenges continue to hinder both construction and operations. As we move into the second half of 2024, these issues remain critical to understanding the current state and future trajectory of the data center industry.
In this article, we unpack the key supply chain themes that are shaping data centers today. Keep reading to explore the trends, challenges, and opportunities that will define the future of data center development.
Data Center Supply Chains: A Brief (Recent) History
In case you somehow missed it, supply chain disruptions posed a major threat in the data center and digital infrastructure industry over recent years. Supply chain issues slowed down data center expansions, while also contributing to higher costs.
Computer chips were in short supply, making it hard to obtain new hardware to deploy in data centers. Building costs soared, sharply increasing the expense of constructing new data centers – a trend made even worse by high interest rates. Energy prices also ticked up, leading to increased operating costs for data centers.
Given these prevailing issues, it’s not an overstatement to say that supply chain disruptions have been the single largest challenge faced by the data center industry in the early 2020s.
Data Center Supply Chain Trends in H2 2024
As of mid-2024, the worst of data center supply chain disruptions seem to be over – but the problems data center operators encountered in recent years have hardly gone away.
As the data center supply chain landscape evolves, opportunities and threats continue to shape the industry. Here’s a closer look at how supply chains have improved and the ongoing challenges that data center operators face:
How supply chains have improved
The good news on the data center supply chain front includes:
In general, semiconductor shortages have abated. It no longer takes many months to purchase new servers or other data center equipment.
Energy prices have stabilized. Data center operators shouldn’t expect to pay less to power and cool servers than they did a year or two ago, but at least their energy bills aren't likely to increase.
Building material delays are no longer as severe, making it easier to complete data center construction projects on time.
Ongoing supply chain challenges
On the other hand, several notable supply chain trends persist in the data center industry:
Although computer chips as a whole are no longer in short supply, manufacturers of chips optimized for AI workloads have warned of shortages. Data center operators hoping to capitalize on the AI boom (and their customers) may struggle to acquire the requisite hardware.
While building materials are no longer subject to severe shipping delays, the costs of many materials important in data centers are higher. For instance, the price of most concrete products has increased steadily since early 2023.
Interest rates on loans remain high relative to recent years and show no sign of declining soon. This also contributes to higher costs for data center construction projects.
In general, these supply chain challenges don’t seem to be taking the wind out of the data center industry's sails. On the contrary, the industry continues to build new facilities across the globe.
It would appear that optimism about the growing value of data centers outweighs concerns regarding supply chain disruptions and higher construction costs. Still, it’s reasonable to assume that supply chain issues may hamper some initiatives – such as efforts to invest in AI infrastructure due to the AI chip shortages, or investments in green data centers, which are likely to cost more due to stubbornly high material and borrowing costs.
Keep Your Eye on the Supply Chain
Supply chain challenges no longer look like the biggest threat to the data center industry’s operations and profitability. But they remain serious issues, especially in certain corners of the industry, like AI data centers. In cases where supply chain problems don’t disrupt data center expansions or operations, they may still lead to significantly higher costs.
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