Growing use of high-speed gigabit Ethernet, rising adoption of Power over Ethernet (PoE) for various applications, and the convergence of business and residential networks are all driving growth in the global router and switch market, according to San Francisco-based Grand View Research.
“Increasing demand for Internet-enabled devices, and the expansion of cloud networking, combined with rising adoption of virtualized technology are expected to drive the industry,” the company reports in Router and Switch Market Analysis And Segment Forecasts To 2022. “Further, proliferation of Wi-Fi technology and growing demand for enterprise WLAN equipment is projected to fuel growth.”
According to Grand View, the global router and switch market is expected to reach $41.03 billion (USD) by 2022. By definition, a router forwards data packets along networks and is connected to a minimum of two networks (typically a WAN or LAN) and the ISP’s network. A switch is a high-speed device that channels incoming data from multiple input ports to the specific output port, which takes the data toward its intended destination.
IHS Infonetics is also tracking healthy growth in the routing and switching market, which was up 19% during the second quarter of 2015.
“Following the typically slow first quarter, global service provider router and switch revenue spiked 19% in the second quarter of 2015 to $3.9 billion,” according to IHS, which points to Cisco, Huawei, Juniper, and Alcatel-Lucent as the biggest players in terms of router-only market share.
Ankita Bhutani, Grand View’s senior analyst, adds Juniper Networks and ZTE Corporation to the list of big players in the router and switch market right now. She says innovation is a high point in the industry today, with companies focused on launching their own cloud-based solutions in order to establish a stronger foothold in the market. For example, Cisco launched its own WAN optimization and cloud-based routing platform for the enterprise known as Cisco Cloud Connected Solutions to address the changing industry trends.
Rolling out New Innovations
Matthias Machowinski, IHS research director, Enterprise Networks and Video, says the biggest innovations taking place on the data center end of the network right now involve 25 and 100 gigabit Ethernet (namely for high-speed connectivity for servers and for the network core).
“At the edge of the network, we’re seeing multi-rate technologies coming to market,” says Machowinski. “Up until now, it’s largely been a gigabit or 10 gigabits Ethernet, and while the 25 and 100 [iterations] are still fairly expensive to roll out, being able to deliver these [higher] speeds from the same port is innovative.”
The drivers behind that innovation are the new wireless technologies that are coming to market, including 802.11ac Wave 2 (for example, 802.11ac, a wireless LAN technology that represents improved performance increase over its predecessor, 802.11).
“That’s the latest generation of Wi-Fi for enterprise,” says Machowinski, “and it’s necessitating the need for upgrades in the access layer of [existing] networks.”
In terms of pricing, purely from the product manufacturer’s position (as opposed to general marketplace pricing), Machowinski says 40 gigabit Ethernet, which is widely used in data centers, is “experiencing a fairly dramatic growth spurt right now.” As a result, he says prices are declining by about 30 percent (year over year) on those products.
“By contrast, fast Ethernet—which has been around forever,” says Machowinski, “is seeing price declines of about 5% annually.”
Surging Demand Ahead
According to Bhutani, growth in the router and switch market is being driven by a robust uptick in mobile usage (particularly in emerging markets), the “bring your own device” (BYOD) movement at the enterprise level, and a new focus on software versus hardware by manufacturers.
“We’re seeing a big shift toward software-defined networking (SDN) and OpenFlow communication interfaces,” Bhutani explains. “We expect this to drive overall demand and uptick in the router and switch market over the next few years.”
In addition, Grand View reports that surging demand for intensive R&D has led to the development of sophisticated high-end products, which are delivered for ease-of-use and to provide control to meet process requirements. This has considerably widened the scope for advanced bandwidth IP routing services, which is expected to spur demand for router and switch markets over the next six years.
In 2016, Machowinski says he expects the new port speeds to “really ramp up,” with an emphasis on 100 gig Ethernet.
“There has been fairly little 100 gig activity, but in the fourth quarter [manufacturers] will be coming out with new QSFP-based switches and new, lower-cost transceivers,” says Machowinski. “We think that will really ramp up the 100 gig market, which hasn’t been growing as fast as 40 gig. That’s going to change in 2016.”