Switch and Router Trackers Show Surprisingly Strong Growth in Third 3Q17

The worldwide Ethernet switch market recorded $6.75 billion in revenue in the third quarter of 2017 (3Q17), an increase of 7.4% year over year, acording to IDC. Meanwhile, the worldwide total enterprise and service provider (SP) router market recorded $3.91 billion in revenue in 3Q17, increasing strong 9.4% on a year-over-year basis.

From a geographic perspective, the 3Q17 Ethernet switch market saw strong performance across the globe. The Central and Eastern Europe (CEE) region saw the best results in 3Q17, growing 16.6% year over year. Within CEE the best performing countries were the Czech Republic (up 47.3% year over year) and Hungary (up 40.2% year over year). Asia/Pacific (excluding Japan)(APeJ) and Western Europe both increased more than 12% year over year (12.6% and 12.4%, respectively) in 3Q17. Notable country results within APeJ and Western Europe include China with a strong 19.4% increase, Germany (up 23.2%), and India (up 18.2% year over year).

On the other hand, United Kingdom (UK) continued to be impacted by uncertainty surrounding Brexit and declined 3.2% year over year in 3Q17. Japan grew in double digits and was up 11.4% year over year in 3Q17. Latin America's solid 7.7% increase was on par with the overall market. Somewhat lagging the overall Ethernet switch market was North America with its 3.4% year-over-year increase. The only region that experienced a decline was Middle East & Africa (MEA) this quarter, going down 1.2% year over year.

100Gb Ethernet switch revenue continues to grow rapidly as adoption by hyperscale and other cloud providers, as well as large enterprises, continues to accelerate. 100Gb shipments reached almost 1.2 million ports and $608 million in revenue. 100Gb now accounts for 9.0% of the total market revenue, up from just 3.6% in a quarter a year ago. 25Gb/50Gb Ethernet switch products are starting to gain traction as well, and in 3Q17 shipments exceeded 750,000 ports and $85 million in revenue.

As expected, the growth in 25Gb, 50Gb, 100Gb is negatively impacting the 40Gb segment. 40Gb shipments decreased 36.7% year over year and revenue was down 20.0% year over year in 3Q17. 10Gb experienced solid results in 3Q17 with shipments growing 49.6% year over year and revenue increasing 5.2% year over year. Meanwhile, 1Gb as the primary connectivity technology for enterprise campus and branch deployments continues to account for a majority of the Ethernet switching market. 1Gb port shipments reached 105.9 million ports after growing 10.6% year over year and now accounts for 66.6% of all ports shipped in 3Q17. In terms of revenue, 1Gb increased 2.4% year over year and accounts for 42.6% of revenue.

The worldwide enterprise and service provider router market grew 9.4% on a year-over-year basis in 3Q17 based on a strong 14.8% increase in the larger service provider segment and a 6.3% decrease 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 services markets especially at the network edge.

The combined enterprise and service provider router market saw a varied regional performance in 3Q17, with APeJ recording the strongest growth (up 31.7% year over year). MEA also performed well, growing 8.9% year over year in 3Q17. CEE, North America, and Japan all saw mid-single digit growth in 3Q17, up 5.6%, 4.8%, and 4.8%, respectively. Western Europe declined 4.7% on an annual basis, while Latin America decreased 15.9% year over year in 3Q17.