Yes, the physical server hosting the vSAN Witness appliance requires an ESXi license, even though the Witness appliance itself does not count towards vCenter licensing. A free vSphere Hypervisor license may suffice, depending on the deployment​.

The vSAN Witness is essential for configurations like stretched clusters or two-node clusters, which require a third party to decide which site should have access to data during failures or outages. It is cost-effective and reduces the need for a dedicated physical ESXi host​

OEMs benefit from the flexibility of not needing to set up dedicated physical infrastructure. The Witness appliance offers an embedded, efficient solution for supporting vSAN configurations, which helps lower.

The vSAN Witness appliance is a preconfigured virtual machine that functions as a witness host for stretched clusters and two-node vSAN clusters. It helps maintain quorum in case of site failures by hosting witness components, ensuring data consistency and availability. It does not run regular virtual machines and is strictly for vSAN functions​