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Ethernet Switch Market Soars Thanks to Hyperscalers and Generative AI


In a world that never stops, technology infrastructure must keep pace. IDCThe Q2 2023 figures highlight this as the Ethernet switch market saw an impressive 38.4% year-over-year increase, translating to $11.8 billion in revenue. In contrast, the global router market for businesses and service providers also grew, albeit at a slightly subdued pace of 9.4% year-over-year, accumulating $4.6 billion in revenue. .

This new information comes from IDC’s latest monitoring tools, which provide a benchmark for industry trends.

The unstoppable growth of the Ethernet switch market

Although this spike may appear as a sudden jump to the casual observer, it is only a continuation of the trend from the first quarter of 2023, which had already seen annualized growth of 31.6%. So, what motivates this incessant approach?

First, we cannot ignore the impact of world events. The onset of the pandemic led to numerous supply chain disruptions. However, as we move towards 2023, a significant alleviation of these challenges has been observed. With improved component availability, suppliers are now taking advantage of late orders. This is particularly important in the non-data center segment of the market. Ethernet switching market, where revenue skyrocketed 52.5% year-over-year in 2Q23.

At the same time, there is growing demand for higher-speed segments in the Ethernet switch market, particularly in data centers. As hyperscalers and cloud providers strive to increase data center network capacity, the demand for advanced switches is increasing. The 200/400 GbE switch segment saw revenue increase 61.9%, while the 100 GbE segment saw 18.5% year-over-year growth.

But growth isn’t limited to high-speed variants. Corporate campuses and branch offices, which primarily deploy low-speed switches, are also reaping the benefits of improved supply chain dynamics. For example, multi-gigabit Ethernet switches, or the 2.5/5GbE segment, saw a staggering 157.5% year-over-year increase in Q2 2023.

A global phenomenon

The growth of the Ethernet switch market is widespread. The Americas led the charge with a 54.3% increase in market revenue. Europe wasn’t far behind, growing 49.1% year-on-year. While the Asia/Pacific region presents a mixed picture, with China seeing a decline of 7.8%, the Japanese market grew by 18.9%.

Vijay Bhagavath, research vice president, cloud networks and data centers at IDC, summarizes this sentiment by stating: “The continued growth momentum of the Ethernet switch market indicates that enterprises, hyperscalers and service providers around the world continue to effectively invest in higher bandwidth and rich platforms. features. A big draw is support for emerging applications, particularly generative AI workloads.

Generative AI, which refers to systems that use data inputs to create new, never-before-seen content, requires robust network infrastructure to operate seamlessly. According to IDC, this would drive demand for high-performance Ethernet switches that can handle large amounts of data streams without latency.

The router market: an overview

On the router front, the service provider segment, encompassing communications and cloud SPs, accounted for 77.5% of total Q2 revenue. Interestingly, while the service provider segment’s revenue grew 14.8% year-on-year, the enterprise segment saw a decline of 6.1%, according to IDC.

Geographically, the Americas leads the router market with a growth of 10.3%, followed by the Europe, Middle East and Africa (EMEA) region with an increase of 18.3% year-on-year. Asia/Pacific showed modest growth of 3% year-on-year.

In conclusion, as global supply chains approach standardization and global technology giants continue to invest in high-performance networking capabilities, the Ethernet Switch Market would promise dynamic changes and opportunities in the coming quarters. For B2B stakeholders, understanding these trends could pave the way for strategic investments and collaborations.

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