IDC's worldwide quarterly ethernet switch and router trackers show slight growth amid diverging regional trends


Jun 6, 2016

03 Jun 2016

Worldwide Ethernet Switch Market Increased 1.4% Year Over Year in First Quarter of 2016; Router Market Up 3.3%

FRAMINGHAM, Mass., June 3, 2016 – The worldwide Ethernet switch market (Layer 2/3) recorded $5.48 billion in revenue in the first quarter of 2016 (1Q16), an increase of 1.4% year over year. Meanwhile, the worldwide total enterprise and service provider (SP) router market finished at $3.47 billion in revenue in 1Q16, growing 3.3% 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 1Q16 Ethernet switch market performed best in Asia/Pacific (excluding Japan)(APeJ), which increased a solid 13.2% year over year. North America also grew in 1Q16, increasing 3.6% on an annualized basis. The United States was the primary driver of that growth, increasing 4.2% year over year.

No other region saw a year-over-year increase in 1Q16. Japan was just below flat, decreasing 0.8% year over year in 1Q16, which represents substantially improved performance from 4Q15. Japan was the sole region to increase sequentially, growing 20.5% quarter over quarter. Results from the other regions were as follows: Western Europe was down 6.3% year over year in 1Q16; Central and Eastern Europe (CEE) declined 7.5%; Middle East and Africa (MEA) fell 8.2%; and Latin America was down 10.5%.

"The first quarter saw its typical sequential downturn, with year-over-year growth just above flat levels," said Rohit Mehra , vice president, Network Infrastructure . "Macroeconomic uncertainty hampered the EMEA region, while North America and APeJ continued with infrastructure refresh cycles, preparing networks for digital transformation. In addition, price erosion played a role globally, especially in the 10/40GbE segments, as the industry prepares for 25/50/100 GbE shipments to commence in volume."

10Gb Ethernet switch (Layer 2/3) revenue was just above flat year over year, coming in at just under $2 billion, growing 1.2% year over year while 10Gb Ethernet switch port shipments grew a robust 29.8% year over year with more than 8.3 million ports shipped in 1Q16 as average selling prices (ASPs) continued to fall. 40Gb Ethernet revenue finished at $679.6 million in 1Q16, growing 32.9% year over year, while shipments reached a record 1.8 million ports, for an increase of 112.0% year over year. 10Gb and 40Gb Ethernet are expected to be the primary drivers of the overall Ethernet switch market in 2016. 1Gb Ethernet switch revenue decreased 5.1% year over year, despite a 9.7% increase in port shipments in the same period.

The worldwide enterprise and service provider router market grew 3.3% on a year-over-year basis in 1Q16 with a 4.9% increase in the Service Provider segment and a 1.6% 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, enabling enterprise network managers and service providers alike to benefit from these emerging capabilities.

The combined enterprise and service provider router market saw a varied regional performance in 1Q16. APeJ was by far the best performing region on a year-over-year basis in 1Q16, increasing 30.6%. MEA followed with 12.2% year-over-year growth. No other region experienced year-over-year growth in 1Q16: Western Europe declined 1.9%, Japan fell 3.5%, North America contracted by 4.9%, and Central and Eastern Europe was down 7.9%. Counter to its leading market performance in the previous quarter, Latin America recorded the largest decline at 14.4% year over year in 1Q16.

Vendor Highlights

Cisco finished the quarter with a 4.0% decline year over year in the Ethernet switching market and market share of 59.0%, down from its 59.2% share in 4Q15. In the hotly contested 10GbE segment, Cisco held 55.7% of the market in 1Q16, down from 56.1% in the previous quarter. Cisco also saw its combined service provider and enterprise router revenue decrease 2.4%, while its market share came in at 48.8% in 1Q16.

On the heels of a very strong quarter, Hewlett Packard Enterprise 's (HPE) Ethernet switch revenue rose 18.1% year over year in 1Q16. HPE's market share stands at 9.7% in 1Q16, up from its 9.2% share in 4Q15.

Huawei continued to perform well in both the Ethernet switch and the router markets. Huawei's Ethernet switch revenue grew 33.2% year over year in 1Q16, while its enterprise and SP router revenue increased 34.1% over the same period. Huawei commanded 16.3% of the total router market.

Juniper had a down quarter in Ethernet switching with a year-over-year decrease of 7.3% in 1Q16. Juniper saw a 2.7% increase year over year in combined service provider and enterprise router revenues, with market share of 14.5%.

"Vendors will need to continue to monitor shifting market dynamics as enterprises and service providers make plans to accommodate digital transformation," said Petr Jirovsky , research manager, Worldwide Networking Trackers. "The emergence of speeds such as 2.5Gb, 5Gb, 25Gb, and 50Gb Ethernet, along with 100Gb Ethernet to tackle emerging customer needs for cloud buildouts and digitization will lead to more transitions in the quarters to come."

Link to Chart "Top Five Ethernet Switch Vendors, Revenue Market Size ($M), 1Q15 to 1Q16"

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, 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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