Comms chips

Ethernet Rules Switch Fabric Market

The market for switching devices, including electronic switch fabrics and small all-optical protection switches, is approaching $1 billion per year and should reach $1.5 billion by 2008, according to a report released yesterday from Communications Industry Researchers Inc. (CIR).

Nearly half that market consists of Ethernet switches, an area dominated by Broadcom Corp. (Nasdaq: BRCM) and Marvell Technology Group Ltd. (Nasdaq: MRVL), although Agere Systems Inc. (NYSE: AGR.A), SwitchCore AB (Stockholm: SCOR), and Vitesse Semiconductor Corp. (Nasdaq: VTSS) are trying to make inroads here.

Very little of the market is dedicated to the traditional TDM switching elements inside older add/drop multiplexers and digital crossconnects.

"Most of the activity these days in telecom/datacom is on the datacom side, in the enterprise. That's where the money is being spent, even in things like WDM that are traditionally associated with the telecom network," says CIR analyst Lawrence Gasman.

The report gloms together all kinds of switching, so it's instructive to see the breakout of sectors:

Table 1: Switch Fabric Revenues, in $M
2003 2004 2008
Signal Switching 7.3 13.0 53.6
Protection Switching 69.8 73.4 88.8
TOTAL 77.1 86.4 142.3
TDM 14.9 15.6 19.0
Ethernet Only 439.6 458.8 651.4
Fibre Channel Only 39.3 41.4 69.7
136.8 160.7 384.9
Multiservice (ASIC) 190.4 188.7 207.3
TOTAL 821.0 865.2 1,332.3
TOTAL 898.1 951.6 1,474.6
Source: CIR

The area most closely pertaining to merchant switch fabrics -- the packet-processing devices, related to network processors, that are sold by Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC), Agere, and others -- would fall mostly in the "Multiservice off-the-shelf" category. For that sector, the figures are in the same ballpark as those provided by The Linley Group in January. Linley analyst Jag Bolaria pegged merchant switch fabrics at a $250 million market in 2007 (see Report Names Switch Fabric Winners ).

So, is Ethernet the hot market for new switch startups? Not really, because of the rapid price drops in that market. "A fair chunk of [the Ethernet revenue pool] is Layer 1 and Layer 2 switches from Broadcom and Marvell -- off-the-shelf stuff where volume production is all that matters," Gasman says. "The areas new companies are looking for are where they can distinguish themselves more."

The figures also show that all-optical switching isn't dead, although the category consists mostly of the 1x2 and 2x2 devices used for protection switching.

— Craig Matsumoto, Senior Editor, Light Reading

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