Worldwide Ethernet Switch Market Increased 3.2% Year Over Year in Fourth Quarter of 2017; Router Market Up 2.4%

FRAMINGHAM, Mass., March 5, 2018 – The worldwide Ethernet switch market (Layer 2/3) recorded $6.9 billion in revenue in the fourth quarter of 2017 (4Q17), an increase of 3.2% year over year. For the full year 2017, the market recorded more than $25.7 billion in revenue for a year-over-year growth rate of 5.4%. Meanwhile, the worldwide total enterprise and service provider (SP) router market recorded just under $4.0 billion in revenue in 4Q17, increasing 2.4% on a year-over-year basis. For the full year 2017, the router market finished at $15.2 billion, an increase of 4.0% over 2016. These results are according to the International Data Corporation (IDC) Worldwide Quarterly Ethernet Switch Tracker and Worldwide Quarterly Router Tracker.

From a geographic perspective, the 4Q17 Ethernet switch market recorded its strongest growth in the Asia/Pacific (excluding Japan) (APeJ) region, which increased 11.1% year over year in 4Q17 and was up 11.3% for the full year 2017. The China market, which makes up the largest share of the regional total, crossed the $1 billion mark for the first time in a single quarter after growing 17.8% year over year in 4Q17 and 16.1% year over year for the full year 2017. Indonesia, although being a smaller market, saw robust growth: 34.1% sequentially from the third quarter of 2017 to 4Q17; 19.7% for the quarter on a year-over-year basis; and 12.1% for the full year 2017.

The Western Europe region grew 2.8% year over year in 4Q17 and 6.5% for the full year 2017. Germany saw especially strong results in 4Q17 after growing 7.8% year over year and 10.8% quarter over quarter. Germany was also up 11.2% year over year for the full year 2017. The Middle East and Africa (MEA) region had mixed results in 4Q17, growing 12.3% sequentially, but declining by 0.8% year over year. The region finished the year up 5.2% compared to 2016. On a country level, the standout performer in MEA was the United Arab Emirates (UAE), which grew 16.7% year over year and 19.2% for the full year 2017. Latin America declined 2.4% year over year but was nearly flat for the full year, growing just 0.3%. The United States, which is the largest worldwide market, was down 5.3% quarter over quarter in 4Q17, but up 0.6% year over year. For the full year 2017, the U.S. increased 2.9% year over year.

"The Ethernet switching market continues to rapidly mature with customers quickly moving to higher 100GbE speeds, especially in datacenter deployments," said Rohit Mehra, vice president, Network Infrastructure at IDC. "While different regions are in varying stages of maturity viz-a-viz public and private cloud growth, the market is clearly looking to capitalize on new infrastructure rollouts, which is helping to drive vendor revenue growth."

100Gb Ethernet switch revenue continues to grow rapidly as adoption by hyperscale cloud providers and large enterprises accelerates. 100Gb shipments reached more than 1.3 million ports and $661 million in revenue in 4Q17. 100Gb now accounts for 9.6% of total market revenue, up from just 4.8% in the same quarter a year ago. 25Gb/50Gb Ethernet switch products continue to gain traction. Shipments exceeded 1 million ports with $124 million in revenue in 4Q17. Growth in 25Gb, 50Gb, 100Gb continue to negatively impact the 40Gb segment. 40Gb port shipments decreased 6.9% year over year and revenue was down 11.2% for all of 2017. The 10Gb market continues to see healthy growth but pricing pressure is holding back revenue increases. 10Gb shipments in 4Q17 grew 37.2% year over year while revenues decreased 2.7%. Meanwhile, 1Gb remains the primary connectivity technology for enterprise campus and branch deployments, driving 1Gb port shipments to 112.6 million in 4Q17, growing 5.4% year over year with market share remaining steady at 66.7% of all ports shipped. In terms of revenue for 4Q17, 1Gb was up sequentially 0.5% but decreased 4.0% year over year and was down 0.5% for the full 2017 year. For the full year 2017, 1Gb made up 42.4% of the overall market's revenue while 10Gb accounted for 34.7%.

The worldwide enterprise and service provider router market grew 2.4% on a year-over-year basis in 4Q17 with the larger service provider segment rising 1.4% and the enterprise portion growing 5.3%. For the full year, the combined market increased 4.0% with the service provider segment driving 5.7% growth and the enterprise segment declining 1.1%. 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 and WAN optimization architectures and WAN transport services markets.

The combined enterprise and service provider router market saw a varied regional performance in 4Q17, with APeJ buoying the market, up 44.1% year over year and up 29.3% annually. MEA increased 4.9% year over year and 8.4% annually. The U.S., which is the largest worldwide market, had a rough quarter with year-over-year revenues down 20.0% in 4Q17 and down 7.9% for the full year. Western Europe was also down 4.3% year over year in 4Q17 and 2.9% for the full year.

Company Highlights

Cisco finished 4Q17 with a 1.4% year-over-year decline in Ethernet switching and market share of 53.0%. For the full year 2017, Cisco switching revenues rose 1.5% over 2016 while recording 54.9% market share (compared to 57.0% in 2016). In the hotly contested 10GbE segment, Cisco is still the market leader, but it's losing share. Cisco held 47.6% of 10Gb revenues, which is down from the 52.7% share it held in 4Q16. Cisco saw its combined service provider and enterprise router revenue decrease 10.5% year over year in 4Q17, while its market share came in at 36.7% in 4Q17, down from 42.0% in 4Q16. For the full year, Cisco's combined router revenues finished at $6.2 billion, a decrease of 5.8% from 2016.

Huawei continued to perform well in both the Ethernet switch and the router markets. Huawei's Ethernet switch revenue grew 8.1% year over year in 4Q17 for a market share of 10.3%. For the full year 2017, Huawei's Ethernet switch revenues grew 24.5% leading to a market share of 8.3%. Huawei's enterprise and SP router revenue increased 53.9% year over year in 4Q17 to reach 28.2% of the total router market in 4Q17 compared to 18.7% in 4Q16. For the full year, Huawei's combined router revenue of $3.6 billion was an increase of 40.3% from 2016, giving the company a market share of 23.8%.

Hewlett Packard Enterprise (HPE) had a strong quarter with its Ethernet switch revenue up 21.8% year over year in 4Q17. HPE's market share stands at 5.9% in 4Q17, up from its 5.0% share 4Q16. (Note: HPE and H3C are tracked separately as of 2Q16).

Arista Networks continued its strong performance with Ethernet switching revenue rising 40.9% year over year and market share of 5.9% in 4Q17. For the full year 2017, Arista grew 44.5% and recorded market share of 5.6%.

Juniper's Ethernet switch revenues declined 7.0% year over year in 4Q17 but rose 12.9% for the full year. Juniper's service provider router revenues declined 21.8% year over year. The company finished 2017 with 18.0% market share in the service provider routing market, down from 20.2% in 2016.

"The Ethernet switch market continues to exhibit healthy growth, driven by network refreshes and investments in the fast-growing campus and datacenter segments. In the combined service provider and enterprise router market, vendor dynamics are beginning to shift as end users look to capitalize on higher-speed cloud connectivity," said Petr Jirovsky, research manager, Worldwide Networking Trackers.

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, 50Gb, 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.