The worldwide Ethernet switch market (Layer 2/3) recorded $6,29-billion in revenue in the third quarter of 2016 (3Q16), an increase of 2% year over year.
Meanwhile, the worldwide total enterprise and service provider (SP) router market finished at $3,56-billion in revenue in 3Q16, increasing 2,6% 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 3Q16 Ethernet switch market recorded its strongest growth in the Middle East and Africa (MEA) region, which increased a solid 11,2% year over year, rebounding from a 2Q16 that saw a moderate decline.
The United Arab Emirates (UAE) was a standout performer, growing 23,5% on an annualized basis in 3Q16.
Similarly, Asia/Pacific (excluding Japan)(APeJ) increased 9,8% year over year in 3Q16. Vietnam (up 57,3% year over year) was the growth pacesetter, while a strong performance in China (up 21,5% year over year) was largely responsible for the region’s overall strong performance.
Latin America also saw strong growth, increasing 9,2% year over year. Strong performers included Peru (up 21,1% year over year) and Argentina (up 17%).
Japan experienced its strongest growth in some time, increasing 2,6% on an annualized basis in 3Q16.
The remaining regions contracted in 3Q16. North America decreased 1,1% year over year in 3Q16, with Canada experiencing a notable 5,7% annualised decline.
Western Europe declined by 1,9% on a year-over-year basis, despite standout quarters in Sweden (up 33,3% year over year) and Portugal (up 32,4% year over year).
Central and Eastern Europe (CEE) saw the most significant decline, with revenues decreasing 5,8% on a year-over-year basis, heavily influenced by a 25,7% year-over-year decline in the Czech Republic.
“Recent macroeconomic developments and maturing IT architectures have led to a spectrum of reactions by IT decision-makers across the regions with regard to Ethernet switching investments in 3Q16,” says Rohit Mehra, vice-president: network infrastructure at IDC. “Strong growth in the 40GbE and 100GbE segments specific to datacentre deployments brought a degree of stabilization to a market in transition where the enterprise campus market for switching declined.”
10Gb Ethernet switch (Layer 2/3) decreased 1,3% year over year in 3Q16, coming in at $2,22-billion, while 10Gb Ethernet switch port shipments grew 10,6% year over year with over 9,76-million ports shipped in 3Q16.
40Gb Ethernet revenue came in at $756,4-million in 3Q16, growing 20m5% year over year, while port shipments reached nearly 1,9-million ports, representing an increase of 68,5% year over year.
10Gb and 40Gb Ethernet are now joined by emerging 100Gb Ethernet (revenue up 330,1% and shipments up 447,5% on annualized basis in 3Q16) to be the primary drivers of the overall Ethernet switch market in 2016.
1Gb Ethernet switch revenue decreased 4,3% year over year, despite a 10,9% increase in port shipments in the same period, pointing to a maturing campus segment.
The worldwide enterprise and service provider router market grew 2,6% on a year-over-year basis in 3Q16 based on a 0,8% increase in the larger service provider segment and a solid 8,2% increase in enterprise routing. This will be a market to watch closely over the coming quarters as software-defined architectures start to take hold across the WAN, with the potential for SD-WAN to disrupt traditional routing architectures and WAN transport markets.
The combined enterprise and service provider router market saw a varied regional performance in 3Q16, with Asia/Pacific once again carrying the market forward. APeJ was by far the best performing region on a year-over-year basis in 3Q16, increasing 23,9%. Japan followed with 15,3% year-over-year growth.
No other region experienced year-over-year growth in 3Q16: Latin America declined 2,6%, North America contracted by 3,5%, Western Europe decreased 5,7%, MEA was down 6,3%, and CEE finished 9,6% below 3Q15.
Cisco finished the quarter with a 5,4% year-over-year decline in the Ethernet switching market and market share of 57%, up from its 56,8% share in 2Q16 but down from 61,5% in 3Q15. In the hotly contested 10GbE segment, Cisco held 53,5% of the market in 3Q16, up from 53% in the previous quarter. Cisco saw its combined service provider and enterprise router revenue decrease 4,8% on an annualised basis, while its market share came in at 44,2% in 3Q16, down from 44,8% in 2Q16.
Huawei continued to perform well in both the Ethernet switch and the router markets. Huawei’s Ethernet switch revenue grew 91,6% year over year in 3Q16, for a market share of 7,2%. Huawei’s enterprise and service provider router revenue increased 23,8% over the same period, with 16,6% of the total router market in 3Q16.
Hewlett Packard Enterprise’s (HPE) Ethernet switch revenue fell 4,3% quarter over quarter in 3Q16. HPE’s market share stands at 5,5% in 3Q16, down from its 6% share in 2Q16. (HPE and H3C are tracked separately as of 2Q16).
Juniper Ethernet switching increased 7,1% quarter over quarter in 3Q16. Juniper also saw a 5,9% increase year over year in combined service provider and enterprise router revenues, with market share of 17,4%.
Arista Networks also performed well in 3Q16, with its Ethernet switching revenue rising 31,5% year over year.
“Software-defined network architectures and network transformation for the digital economy are among the factors shaking up the core network infrastructure segments,” says Petr Jirovsky, research manager: Worldwide Networking Trackers at IDC. “This, combined with the emergence of new Ethernet port speeds across the datacentre and enterprise campus deployments, will likely lead to continued interest.”
