IDC's Worldwide Quarterly Ethernet Switch and Router Trackers Show Ethernet Switch Market Moderately Improving in 3Q15; Router Market Stays Flat

03 Dec 2015

IDC's Worldwide Quarterly Ethernet Switch and Router Trackers Show Ethernet Switch Market Moderately Improving in 3Q15; Router Market Stays Flat

FRAMINGHAM, Mass., December 3 , 2015 – The worldwide Ethernet switch market (Layer 2/3) exceeded $6.1 billion in revenue in the third quarter of 2015 (3Q15), an increase of 2.0% year over year and a healthy increase of 6.1% quarter over quarter. Meanwhile, the worldwide total enterprise and service provider (SP) router market could not repeat its exceptionally strong growth from last quarter and ended 3Q15 flat on an annual basis and down -7.2% quarter over quarter. 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 3Q15 Ethernet switch market performed best in North America, which grew a strong 8.2% year over year and 9.9% quarter over quarter. Asia/Pacific (excluding Japan)(APxJ) also increased a solid 3.9% year over year carried mainly by Korea (up 19.2% year over year) and Hong Kong (up 13.4% year over year). China also increased a healthy 3.6% year over year in 3Q15. Meanwhile, Australia experienced a down quarter and declined -5% year over year in 3Q15. Western Europe was flat to slightly positive with growth of 0.8% but with significant variance among country-level results. Ireland (up 31.7%), Spain (up 10.5%), France (up 9.8%), and Netherlands (up 9.1%) were the key contributing countries to the year-over-year growth, offsetting double-digit declines in Portugal, Italy, Denmark, and Norway. The Middle East & Africa (MEA) region declined a modest -1% year over year in 3Q15, but Latin America, Japan, and Central & Eastern Europe (CEE) regions were quite weak in 3Q15 declining -10%, -19.8%, and -22.5% year over year, respectively, in 3Q15.

"Overall revenue and port shipment growth rebounded somewhat in 3Q15, even though the usually strong 10Gb segment continued to see weakness in year-over-year revenues," said Rohit Mehra , Vice President, Network Infrastructure, at IDC. "At any rate, shipments of 10Gb Ethernet and higher speeds is a testament to the strong demand to support a diverse array of enterprise and datacenter workloads and service provider infrastructure. Given this, we expect the market to remain relatively healthy but intensively competitive."

10Gb Ethernet switch (Layer 2/3) revenue decreased -1.6% year over year, coming in at $2.2 billion while 10Gb Ethernet switch port shipments grew a robust 27.4% year over year with nearly 8.5 million ports shipped in 3Q15 as average selling prices continued to fall. 40Gb Ethernet revenue reached a record $644 million in 3Q15, growing 41.4% year over year. 10Gb and 40Gb Ethernet are expected to continue to be the primary drivers of the overall Ethernet switch market in the near-term. 1Gb Ethernet switch revenue declined slightly (-0.3% year-over-year) as this segment continues to face price erosion.

The worldwide enterprise and service provider router market was flat on a year-over-year basis in 3Q15 as the 1.1% annual increase in the Service Provider segment was offset by a -3.5% decline 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 3Q15. MEA was by far the best performing region in 3Q15 with its 23.5% year over year growth, followed by 8.7% annual growth in Western Europe. Latin America (up 2.7%), North America (down -1.8%), and APxJ (down -2.6%) were relatively close to the overall global market performance. But as in the Ethernet switch market, CEE and Japan significantly underperformed in 3Q15, declining -13.6% and -22.3% year over year respectively.

Vendor Highlights

Cisco finished the quarter with 0.8% year-over-year growth in the Ethernet switching market and market share of 61.6%, up slightly from its 60.1% share in 2Q15. In the hotly contested 10GbE segment, Cisco held 59.1% of the market in 1Q15, up from 57.6% in the previous quarter, but down from the 63.4% it held in 3Q14. Cisco's service provider and enterprise router revenue decreased -2.3% year-over-year.

HP's Ethernet switch revenue came in essentially flat on both an annual and sequential basis in 3Q15. HP's market share stands at 9.0% in 3Q15, slightly below its 9.3% share in 3Q14. HP's solid year-over-year performance in the 10Gb (up 8.8%) and 40Gb (up 68.1%) segments was offset by the 11% year-over-year decline in 1G switching.

Juniper had a record quarter in Ethernet switching with a year-over-year increase of 39.4% and sequential growth of 6.5% in 3Q15. Its router revenue was flat sequentially but increased 11.0% year over year in 3Q15 due to a robust 20% year-over-year increase in sales of core service provider routers.

Huawei continued to perform well in both the Ethernet switch and the router markets. Huawei's Ethernet switch revenue grew 36.7% year over year in 3Q15 while the enterprise and SP router revenue increased 8.9% year over year in 3Q15.

"While demand for higher speeds such as 10Gb and 40Gb Ethernet increases, declining average switch port selling prices have had a flattening effect on overall market growth," said Petr Jirovsky , Research Manager in IDC's Networking Trackers Group. "The emergence of speeds such as 2.5Gb, 5Gb, 25Gb, and 50Gb Ethernet, along with 100Gb Ethernet reaching critical mass over the next few years, will make this an interesting market to watch."

Chart

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, L4-7). 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