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Ethernet switch market posts growth, router market lags

Posted: 08 Sep 2014 ?? ?Print Version ?Bookmark and Share

Keywords:IDC? Ethernet switch? router market? WLAN?

Global revenues in the Ethernet switch market (Layer 2/3) have approached $5.7 billion in 2Q14, representing an increase of 6.2 per cent YoY and 8.1 per cent QoQ, according to International Data Corp. (IDC). However, worldwide router market revenues plunged four per cent YoY despite growing 7.6 per cent sequentially over the seasonally weak 1Q14, added the market analyst.

From a geographic perspective, the Ethernet switch market saw its highest growth in Asia/Pacific (excluding Japan) (APeJ), which had strong YoY growth of 21 per cent in 2Q14. This growth was due to exceptional results in China (up 40.2 per cent YoY) and India (up 29.3 per cent) that more than offset the market weakness in Thailand and Indonesia, which both experienced double-digit YoY declines in 2Q14. Latin America also experienced strong growth in the Ethernet switch market, growing 18.7 per cent YoY with Argentina, Peru and Brazil leading the way. Western Europe saw its best performance since 3Q10 with a 13.9 per cent YoY increase in 2Q14, showing the potential for a solid rebound after years of difficult macroeconomic conditions putting pressure on investments. On the other hand, Central & Eastern Europe (CEE) declined 16.3 per cent YoY in 2Q14 as political unrest in Ukraine took its toll. Ukraine declined 31.7 per cent, while Russia was down 17.5 per cent YoY in 2Q14. However, relative market weakness was not limited to CEE. Japan declined 4.3 per cent YoY and North America was down 0.7 per cent YoY, as both regions significantly underperformed the overall market.

"The worldwide Ethernet switch market saw strong growth as a result of continued gains in 10GbE and 40GbE port shipments, especially in the data centre, and with some regions and countries really outperforming over recent historical trends," said Rohit Mehra, VP, network infrastructure at IDC. "The GbE market also did well in terms of shipments in 2Q14, showing its ongoing importance across the enterprise at the network edge, as well as in providing the underlying network platform on which enterprise WLANs are being deployed."

10Gb Ethernet switch (Layer 2/3) revenue increased 7.8 per cent YoY to reach $2.2 billion while 10Gb Ethernet switch port shipments grew a strong 23 per cent YoY to reach six million ports shipped in 2Q14. 40Gb Ethernet continues to expand as a stand-alone segment and now accounts for more than $323 million per quarter in revenue. 10Gb and 40Gb Ethernet continue to be the primary driver for revenue growth in the overall Ethernet switch market.

The worldwide router market declined four per cent YoY in 2Q14 with varied results across the key segments within the market. The service provider segment declined 0.9 per cent YoY while the enterprise segment was down 12.4 per cent YoY. The router market also saw varied results on a regional basis. Japan and Latin America registered the best performance in 2Q14 with YoY growth in excess of seven per cent. The Middle East & Africa region grew 4.6 per cent YoY and Western Europe added 1.7 per cent growth in 2Q14. APeJ finished Q2 flat, while North America (down 11.5 per cent YoY) and CEE (down six per cent) effectively dragged the overall market lower in 2Q14.

From a vendor perspective, Cisco's Ethernet switch (Layer 2/3) revenue increased 1.5 per cent YoY in 2Q14 but Cisco's market share dipped below 60 per cent for the first time to 59.8 per cent in 2Q14. This was down from 60.5 per cent in 1Q14 and 62.6 per cent in 2Q13. Cisco's market share in the fast growing 10GbE market segment was 61.3 per cent in 2Q14, down from 67.6 per cent in 2Q13. Cisco's service provider and enterprise router revenue declined 13.3 per cent YoY this quarter.

HP's Ethernet switch revenue increased 11.9 per cent YoY and 18.2 per cent QoQ in 2Q14, significantly ahead of the overall market. HP's market share now stands at 10 per cent in 2Q14, up from 9.1 per cent in 1Q14 and up from 9.5 per cent in 2Q13.

Juniper also had a strong quarter, outperforming the overall market in both Ethernet switching and routing. Its router revenue was up 5.2 per cent YoY and its Ethernet switch revenue saw a very healthy increase of 26 per cent YoY.

"With growth in cloud deployments and increasing demand from data centres across the globe, 10GbE and 40GbE Ethernet will continue to drive the Ethernet switch market," said Petr Jirovsky, research manager in IDC's networking trackers group. "However, vendors should be attuned to differences in market dynamics across the regions."

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