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04 Jun 2018

IDC's Worldwide Quarterly Ethernet Switch and Router Trackers Show Marked Improvement for Q1 2018; Results Bode Well for Year Ahead

Worldwide Ethernet Switch Market Increased 10.9% Year Over Year in First Quarter of 2018; Router Market Was Down 1.4%

FRAMINGHAM, Mass., June 4, 2018 – The worldwide Ethernet switch market (Layer 2/3) recorded $6.29 billion in revenue in the first quarter of 2018 (1Q18), a healthy increase of 10.9% year over year. Meanwhile, the worldwide total enterprise and service provider (SP) router market recorded $3.31 billion in revenue in 1Q18, a 1.4% decrease 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 1Q18 Ethernet switch market recorded its strongest growth in the Asia/Pacific (excluding Japan) (APeJ) region, which increased a solid 21.0% year over year. At a country level, the People's Republic of China (PRC), the largest market in APeJ, had the region's most robust growth, rising 29.7% year over year to $769.8 million; Korea also posted strong 24.2% year-over-year growth. Central and Eastern Europe (CEE) was another standout region, growing 19.5%, with Poland up a strong 39.6% and the region's largest market, Russia, up 19.2%. The Middle East & Africa (MEA) region recorded 11.7% growth, while the United States, the world's largest market, was up 7.0% year over year to $2.44 billion. The Latin America (LA) region's growth continued to lag, up only 1.2%. Japan, meanwhile, dropped 2.0% year over year.

The Ethernet switch market's 10.9% growth in 1Q18 is a strong uptick from the 3.5% growth recorded year over year between 1Q16 and 1Q17. The quarter's growth also outpaced the full year 2017 growth of 5.5%, which bodes well for the market's future outlook.

"After modest gains in 2017, the Ethernet switch market started 2018 with a strong first quarter," said Rohit Mehra, vice president, Network Infrastructure at IDC. "There are two macro trends that contributed to growth: The emergence of next-generation software-based network intelligence platforms that add to the intrinsic value of networking, and the push by large enterprises, hyperscalers, and service providers to leverage faster Ethernet switching speeds for cloud rollouts. Both trends bode well for this industry moving forward."

10Gb Ethernet switch (Layer 2/3) revenue increased 5.1%, coming in at $2.05 billion, while 10Gb Ethernet port shipments rose 41.6%. 40Gb Ethernet revenues were down 4.0% despite port shipments increasing 7.8%, reflecting ongoing price erosion in the market and unfavorable price performance ratios relative to 25Gb and 100Gb products. 25Gb revenue increased 176% year over year with port shipments growing 359% year over year in 1Q18. 100Gb revenue increased 83.8% year over year to $742.5 million and port shipments grew 117.7% year over year in 1Q18. 1Gb Ethernet revenues were up 5.4% in the quarter, with port shipments up 15.8%, which reverses a trend from last year and shows the interest in refreshing campus and branch networks. Overall, across all speeds, port shipments in 1Q18 rose 12.0% year over year.

The worldwide enterprise and service provider router market contracted 1.4% on a year-over-year basis in 1Q18 with a decrease of 2.7% in the enterprise segment and a decrease of 0.9% in the larger service provider routing market. The router market, traditionally the most volatile across the networking domain, has been impacted by the emergence of software-defined architectures that have taken hold across the WAN, with SD-WAN and network virtualization disrupting traditional routing architectures.

The combined enterprise and service provider router market saw varied regional performance in 1Q18. The APeJ region again significantly outperformed all other regions with its 13.3% year-over-year growth. Western Europe rose 2.6%, MEA grew 2.1%, and LA increased 1.3%. Other regions all declined on an annual basis. Japan's market contracted a significant 35.5% year over year while the U.S. market was down 11.4% year over year.

Vendor Highlights

Cisco finished 1Q18 with a year-over-year increase of 7.6% in Ethernet switching revenues and a market share of 53.4%, down from its 55.0% share in 1Q17 and down from 58.9% in 1Q16. In the hotly contested 10GbE segment, Cisco's market share dropped to 48.1%, down from 50.9% in 1Q17, but up sequentially from 4Q17 when it stood at 47.6%. Cisco saw its combined service provider and enterprise router revenue decrease 10.2% on an annualized basis, while its market share came in at 39.8% in 1Q18, down from 43.7% in 1Q17.

Huawei continued to perform well in both the Ethernet switch and the router markets on an annualized basis. Huawei's Ethernet switch revenue grew 41.2% year over year in 1Q18 for a market share of 8.1%, up from 6.3% in 1Q17. The company's share in the 10GbE market continues to rise, up in 1Q18 to 10.7%, from 8.4% in 1Q17. Huawei's enterprise and SP router revenue increased 25.9% year over year to finish with 25.1% share compared to 19.8% of the total router market in 1Q17.

Hewlett Packard Enterprise's (HPE) Ethernet switch revenue grew 11.1% from 1Q17 to 1Q18 and its market share held steady at 6.0% during that time.

Arista Networks performed well in 1Q18, with its Ethernet switching revenue rising 39.9% year over year, earning a market share of 6.5%, up from 5.1% in 1Q17.

Juniper's Ethernet switch revenue fell 4.8% year over year in 1Q18, bringing its market share to 3.7% compared to 4.3% in 1Q17. Juniper also saw a 21.8% decrease in combined service provider and enterprise router revenues, with market share falling to 12.3% compared to 15.5% in 1Q17.

"Cloud and software-defined architectures are shaking up the Ethernet switch and router markets," said Petr Jirovsky, research manager, Worldwide Networking Trackers. "Continued price erosion and increasing divergence between buying preferences of cloud and communications service providers and enterprises creates a challenging environment for vendors, but also opportunity for end users."

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.

For more information about IDC's Worldwide Quarterly Ethernet Switch and Router Trackers, please contact Kathy Nagamine (knagamine@idc.com).

About IDC Trackers

IDC Tracker products provide accurate and timely market size, vendor share, and forecasts for hundreds of technology markets from more than 100 countries around the globe. Using proprietary tools and research processes, IDC's Trackers are updated on a semiannual, quarterly, and monthly basis. Tracker results are delivered to clients in user-friendly excel deliverables and online query tools.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a wholly-owned subsidiary of International Data Group (IDG), the world's leading media, data and marketing services company that activates and engages the most influential technology buyers. To learn more about IDC, please visit www.idc.com. Follow IDC on Twitter at @IDC and LinkedIn.

Coverage

Contact
For more information, contact:

Rohit Mehra
rmehra@idc.com
508-935-4343

Petr Jirovsky
pjirovsky@idc.com
413-313-6112

Michael Shirer
press@idc.com
508-935-4200