This article was first posted in Outperforming the Market on June 5, 2023.
Several members of Outperforming the Market have asked me about Super Micro Computer Inc. (NASDAQ:SMCI), which I have done a deep dive on. In this article, I will introduce SMCI and cover various aspects of the company, including its segments and products, competitive landscape and advantages, amongst others.
SMCI’s core business is its server and storage systems segment, which makes up almost 80% of revenues. SMCI sells accelerated compute platforms and some of its key product lines include its SuperBlade and MicroBlade system families that is meant to share common computing resources and reduce the space and power needs compared to standard servers.
The more exciting product line of SMCI resulting in the recent share price rally is its GPU or accelerated systems to cater to the increasing demands for the generative AI applications, and data center optimized server systems that bring about improved scalability and performance-per-watt and better thermal architecture.
On top of its server and storage business, SMCI has a subsystems and accessories segment, which makes up 20% of revenues. Most of the subsystems and accessories sold by SMCI are meant to be integrated into complete server and storage solutions. Some of the products sold here include server boards, chassis, power supplies and other accessories.
In FY2022, there was an increase of 60% from the prior year in the server and storage systems segment. This came from SMCI’s large enterprise and datacenter customers.
In terms of geographical mix, the United States make up almost 60% of its revenues, while Asia and Europe take up around 20% and 15% respectively. SMCI highlighted that China makes up only 3% of its revenues.
Highly competitive industry
I would note that SMCI is operating in an industry that is “highly competitive, rapidly evolving and subject to new technological developments, changing customer needs and new product introductions”, in the words of SMCI in its latest annual report.
SMCI competes with global