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Publication date: 07 Dec 2023

IDC's Worldwide Quarterly Ethernet Switch Tracker Shows Market Growth Continuing in Third Quarter of 2023 While the Router Market Declined


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Worldwide Ethernet switch revenue increased 15.8% year over year in Q3 2023; Router market revenue declined 9.4%

NEEDHAM, Mass., December 7, 2023 – The worldwide Ethernet switch market grew revenue 15.8% year over year to $11.7 billion in the third quarter of 2023 (3Q23). The total worldwide enterprise and service provider (SP) router market recorded $3.7 billion in revenue in 3Q23, a year-over-year decline of 9.4%. These growth rates are according to results published in the International Data Corporation (IDC) Worldwide Quarterly Ethernet Switch Tracker and Worldwide Quarterly Router Tracker.

Ethernet Switch Market Highlights

The Ethernet switch market's growth of 15.8% in 3Q23 builds on annualized growth of 38.4% in 2Q23. Year to date in 2023, the Ethernet switch market is up 27.7% compared to the first three quarters of 2022. A major driver of growth in the market continues to be the easing of supply chain issues that began during the global pandemic. With improved component availability, vendors are increasingly able to recognize revenues from fulfilling backlogged product orders. This trend is particularly relevant in the non-datacenter (non-DC) segment of the Ethernet switching market, where revenues grew 22.2% in 3Q23 and are up 36.5% year to date. Revenues in the datacenter (DC) portion of the market rose 7.2% year over year in 3Q23. Through the first three quarters of the year, DC market revenues are up 16.8%.

Within the DC segment of the market, hyperscalers and cloud providers continue to drive adoption of ever-higher Ethernet switch speeds. Market revenues for 200/400 GbE switches rose 44.0% year over year in the DC segment, with port shipments up 63.9% on an annualized basis. Across both the DC and non-DC segments of the market, 100GbE revenues increased 6.0% year over year in 3Q23 and 25/50 GbE revenues increased 26.3%. ODM (original device manufacturer) Direct sales continue to be an important part of the datacenter segment, rising 7.4% year over year to make up 14.7% of the datacenter segment's revenues.

In the non-DC segment, lower-speed switches that are typically deployed in enterprise campus and branch locations showed strength as vendors drew down their backlog of product orders. In the quarter, revenues for 1GbE switches rose 18.3% year over year and 10GbE switches rose 5.8% in the non-DC segment. 2.5/5GbE switch revenue in the non-DC segment – also known as multi-gigabit Ethernet switches – rose 92.0% year over year in 3Q23.

From a geographic perspective, the total Ethernet switch market saw growth in most regions of the world. In the United States, revenues rose 26.7% year over year in the quarter, while in Canada, the market improved 28.6%. In Latin America, the market rose 25.9%. In Western Europe, the market rose 12.0%, while in Central & Eastern Europe the market rose 17.8%. In the Asia/Pacific region (excluding Japan and China), markets grew 14.1% with the People’s Republic of China market declining 12.4% year over year and Japan’s market growing 2.9%.

"Ethernet switching continues to be a dynamic market driven by mega trends. Firstly, hyperscalers and service providers continue to drive higher-speed and feature-rich platforms to support new datacenter workloads, such as Generative AI," said Vijay Bhagavath, IDC Research vice president, Cloud and Datacenter Networks at IDC. "Meanwhile, with normalizing supply chains, Ethernet switch vendors are able to draw down record-high product order backlogs. Ethernet switching remains a critically important technology for efficiently and effectively connecting networks across the globe.

Router Market Highlights

The service provider segment of the router market, which includes both communications SPs and cloud SPs, declined 9.4% year over year in 3Q23 and delivered 75.3% of the market's total revenues. Revenues in the enterprise segment also declined 9.4% in the quarter and account for the remaining share of the market. From a regional perspective, the combined service provider and enterprise router market in the Americas declined 7.3%, while in the Asia/Pacific region, the market fell 11.1% year over year. In the Europe, Middle East & Africa (EMEA) region, the market was off 10.4% year over year.

Vendor Highlights

Cisco's Ethernet switch revenues increased 20.1% year over year in 3Q23 with DC segment revenues up 12.9% and non-DC segment revenues growing 23.2%. Nearly three quarters (72.2%) of the company's Ethernet switch revenues are in the non-DC segment. The company's market share stood at 45.1% to end 3Q23. Cisco's combined service provider and enterprise router revenue declined 3.6% in the quarter, giving the company a market share of 39.3% in 3Q23.

Arista Networks' Ethernet switch revenues – 91.1% of which are in the DC segment – increased 27.3% year over year in 3Q23, giving the company 10.6% market share.

Huawei's Ethernet total switch revenue increased 1.0% in 3Q23, giving the company a market share of 9.6%. The company's combined SP and enterprise router revenue declined 6.5%, giving the company a market share of 25.7% in the quarter.

HPE's Ethernet switch revenue – 92.0% of which is in the non-DC segment – increased 88.4% in 3Q23, resulting in a market share of 7.7%.

H3C's Ethernet switch revenue declined 11.5% year over year 3Q23, giving the company a market share of 4.1%. In the combined service provider and enterprise routing market, H3C's revenues decreased 3.7% in 3Q23, resulting in a market share of 2.2%.

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