IDC's worldwide quarterly ethernet switch and router trackers show improved growth in second quarter of 2017


Sep 19, 2017

Worldwide Ethernet Switch Market Increased 7.8% Year Over Year in Q2 2017; Router Market Up 6.7%

FRAMINGHAM, Mass., September 19, 2017 – The worldwide Ethernet switch market (Layer 2/3) recorded $6.43 billion in revenue in the second quarter of 2017 (2Q17), an increase of 7.8% year over year. Meanwhile, the worldwide total enterprise and service provider (SP) router market recorded $3.92 billion in revenue in 2Q17, increasing 6.7% on a year-over-year basis. These growth rates are according to results published in the International Data Corporation (IDC) Worldwide Quarterly Ethernet Switch Tracker and Worldwide Quarterly Router Tracker.

From a geographic perspective, the 2Q17 Ethernet switch market recorded its strongest growth in the Middle East and Africa (MEA) region and in Asia/Pacific (excluding Japan)(APeJ), where both increased a solid 16.8% year over year in 2Q17. At the country level, Israel (up 85.2% year over year) and Vietnam (up 38.8% year over year) were among the standouts in their respective regions. Both European regions (Western Europe and Central and Eastern Europe (CEE)) saw strong growth, with each increasing 5.5% year over year in 2Q17, with Greece (up 142.6% year over year) and Hungary (up 48.1% year over year) being the growth pacesetters.

North America grew 4.9% year over year in 2Q17, with the United States growing 5.0%. Japan experienced a flat-to-positive performance in 2Q17, with a 0.1% year-over-year increase. Latin America was the sole region to experience a decline, contracting 3.3% on an annualized basis. Within Latin America, Argentina was once again a bright spot, growing 49.1% over 2Q16.

"Application explosion associated with digital transformation and continued proliferation of cloud buildouts underpinned a strong market performance in 2Q17," said Rohit Mehra, vice president, Network Infrastructure at IDC. "These transformational trends drive port shipments up, however the promise of emerging higher port speeds continually shifts the dynamics of Ethernet switching investments. Solid growth should continue throughout 2017, even as Ethernet switching and routing purchase behavior trends may take some turns."

10Gb Ethernet switch (Layer 2/3) revenue increased 4.2% year over year in 2Q17, coming in at $2.24 billion, while 10Gb Ethernet switch port shipments grew 53.1% year over year with over 13.8 million ports shipped in 2Q17. 40Gb Ethernet revenue came in at $681.5 million in 2Q17, declining 9.1% over 2Q16, while port shipments fell just below 1.4 million, representing a decrease of 27.7% year over year. The 40Gb port shipments and revenue declines were primarily due to the rapid adoption of native 25Gb for top-of-rack Ethernet switch products by the larger public cloud and hyperscale providers. 25Gb port shipments reached over 557k ports and $71.4 million in revenue in 2Q17. 100Gb Ethernet also strongly benefited from this trend with revenue growing 284% and shipments increasing 639% on an annualized basis in 2Q17. 1Gb Ethernet switch revenue increased 0.9% year over year in 2Q17, alongside a 13.6% increase in port shipments in the same period, pointing to a maturing campus segment.

The worldwide enterprise and service provider router market grew 6.7% on a year-over-year basis in 2Q17 based on an 11.2% increase in the larger service provider segment and a 7.1% decrease in enterprise routing. This will be a market to watch closely over the coming quarters as software-defined architectures start to take hold across the WAN, with the potential for SD-WAN to disrupt traditional routing architectures and WAN transport services markets especially at the network edge.

The combined enterprise and service provider router market saw a varied regional performance in 2Q17, with APeJ recording the strongest growth (up 30.7% year-over-year). MEA and CEE also performed well, growing 22.0% and 21.2% over 2Q16, respectively. Every remaining region experienced declines in 2Q17. Western Europe contracted 1.0% on an annualized basis, while North America decreased 6.4%. Latin America was down 8.4% over 2Q16, while Japan recorded the weakest performance, declining 12.0% year-over-year.

Vendor Highlights

Cisco finished 2Q17 with a year-over-year increase of 3.8% in the Ethernet switching market and market share of 54.7%, down from its 55.1% share in 1Q17 and down from 56.8% in 2Q16. In the vigorously contested 10GbE segment, Cisco held 51.8% of the market in 2Q17, up from 51.4% in the previous quarter. Cisco saw its combined service provider and enterprise router revenue decrease 1.9% on an annualized basis, while its market share came in at 41.2% in 2Q17, down from 43.9% in 1Q17, and 44.8% in 2Q16.

Huawei continued to perform well in both the Ethernet switch and the router markets on an annualized basis. Huawei's Ethernet switch revenue grew 39.9% year over year in 2Q17 for a market share of 8.5%, up from 6.3% in 1Q17 and 6.5% in 2Q16. Huawei's enterprise and SP router revenue increased 41.7% over the same period to finish with 25.2% of the total router market in 2Q17 compared to 19.8% in 1Q17 and 18.9% in 2Q16.

Hewlett Packard Enterprise 's (HPE) Ethernet switch revenue decreased 0.4% year over year in 2Q17 and its market share stands at 5.6%, down from 6.0% in 1Q17 and 6.0% share in 2Q16. (Note: HPE and H3C are tracked separately as of 2Q16).

Arista Networks performed well in 2Q17 with its Ethernet switching revenue rising 50.2% year over year and earning a market share of 5.5%, up from 3.9% in 2Q16.

Juniper's Ethernet switching increased by a notable 33.2% year over year in 2Q17 bringing its market share to 4.3% versus 3.5% in 2Q16. Juniper also saw a 0.4% year-over-year decrease in combined service provider and enterprise router revenues, with market share of 14.6% compared to 15.7% in 2Q16.

"Performance across emerging regional markets such as APeJ and MEA now have a considerable impact across the broader Ethernet switching and routing market," said Petr Jirovsky, research manager, Worldwide Networking Trackers. "This has opened up opportunities for emerging vendors to gain share and is challenging more established vendors to rethink how they compete."

The Worldwide Quarterly Ethernet Switch Tracker and the Worldwide Quarterly Router Tracker provide total market size and vendor shares for the Ethernet switch and router technologies in an easy-to-use Excel pivot table format. The geographic coverage for both the Ethernet switch market and the router market includes eight major regions (USA, Canada, Latin America, Asia/Pacific (excluding Japan), Japan, Western Europe, Central and Eastern Europe, and Middle East and Africa) and 60 countries. The Ethernet switch market is further segmented by speed (100Mb, 1000Mb, 10Gb, 25Gb, 40Gb, 100Gb), product (fixed managed, fixed unmanaged, modular), and layer (L2, L3, ADC). Measurement for the Ethernet switch market is provided in vendor revenue, value, and port shipments. The router market is further split by product (high-end, mid-range, low-end, SOHO), deployment (service provider, enterprise), connectivity (core, edge), and the measurements are in vendor revenue, value, and unit shipments.

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