Another Positive Quarter for the Global Router & Switching Market
Demand for data center interconnect products is driving growth in the routing and switching market
The 4Q15 total Worldwide Carrier Routing and Switching market increased 6.9% percent quarter over quarter and 3.9% year over year. The core routing segment posted revenue of $605.7 million, increasing 3.1% q-q and 7.5% y-y. The edge/switching segment posted revenue of $2.5 billion, increasing 7.9% q-q and 3.1% y-y.
In 2015 we saw
- Significant increase in deployments of 100 GE ports, driven by the growth in IP traffic as well as the availability of higher capacity line cards.
- Core router upgrades and replacements prompted by the move to 100GE helped the market to grow in 4Q15. The core router space saw diversification and expansion from traditional IP/MPLS and Internet peering to metro and DCI. Some vendors, specifically Juniper and ALU/Nokia, experienced growth in most regions because of this diversification.
- The increase in demand for high-speed Internet, expansion of cloud networking combined with adoption of virtualized technology has companies thinking of upgrading their technology.
- And with the shift in demand from hardware networking solutions to software-based solutions, the demand for core Ethernet devices increased.
In rank order, Cisco Systems, Alcatel-Lucent, Juniper Networks, and Huawei Technologies were the market share leaders in the Service Provider Router & Carrier Ethernet Switch markets, accounting for almost 90 percent of revenue in 2015.
The Worldwide Carrier Routing and Switch market has been affected by increases in fixed broadband traffic and mobile broadband traffic on 3G and LTE networks, which are driving infrastructure growth. Next-generation devices as well as pressure on service providers to provide content-rich applications is nudging many service providers to upgrade their access, aggregation, core networks, and mobile backhaul. In 2016, we expect the developments in technologies such as DOCSIS3.1, LTE, 5G and G.fast, which in turn will drive IP traffic growth and prompt service providers to invest more in routers to keep their competitive advantage.
Equipment vendors saw double- and in some cases triple-digit growth in 100G ports. In 2015 we saw a significant increase in adoption of 100 Gigabit Ethernet (100GbE), which was driven by the continuous increase in IP traffic as well as the availability of higher capacity line cards. We expect this momentum to continue into 2016 as newer core router platforms go from test to deployment stages, and next generation 100 Gbps Ethernet optical interfaces become available.
In 2015, NFV saw traction with proof of concepts becoming deployments. Increasingly, operators are turning to NFV as an enabler of new services, short service innovation cycles, and as a means to drastically reduce the operational cost of new and existing services. AT&T has targeted virtualizing 75 percent of its business by 2021. Virtual CPEs, software-defined data centers, and VPN platforms are strong candidates for SDN/NFV transition. AT&T has identified wireless packet core as its first major function to virtualize. Dell Inc., which purchased EMC for a $67 billion, has entered the virtualization market to offer public/private software-defined datac enter cloud. Additionally, carriers realize cost savings as they do not have to buy, in some cases, additional hardware or vendor-specific hardware.
Data center interconnect has become a vital part of the service provider edge; currently, ACG sees six to eight percent of edge routers being dedicated to DCI. Traditionally, the router was used at the gateway function in the data center, but a large number are now for the data center for connectivity. The global demand for data centers has increased and data center equipment is seeing double-digit growth every quarter. Global data center traffic is expected to grow nearly three-fold, and by 2019 data center traffic will reach 104 zettabytes per year.
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