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Routing

Router/switch market back to pre-pandemic levels – Dell'Oro

The worldwide service provider router and switch market, according to Dell'Oro Group, has pretty much got over COVID-19.

The market research firm calculates that Q1 2021 revenues surged 16%, year-on-year, to $3.2 billion. The uptick reflects recovery from supply chain disruptions that occurred in the initial stages of the pandemic during Q1 2020.

Dell'Oro now expects yearly growth to settle back down to pre-pandemic levels.

Surge pricing: The switch and router market has surged back to pre-pandemic levels according to Dell'Oro.  (Source: Matt Paul Catalano on Unsplash)
Surge pricing: The switch and router market has surged back to pre-pandemic levels according to Dell'Oro.
(Source: Matt Paul Catalano on Unsplash)

"Our analysis indicates that the market grew about 3% when Q1 2020 [figures] are adjusted for the pandemic-induced shortfall," Shin Umeda, vice president at Dell'Oro Group, told Light Reading by email.

"We expect the market to grow at a similar rate over the remaining three quarters of the year."

The strongest rebound was in North America, followed by Europe and parts of the Asia-Pacific region. Service providers are picking up again on critical network technology upgrades that were delayed last year, which Umeda thinks bodes well for the rest of 2021.

"The transition to 400Gbit/s products and upgrades of mobile transport [backhaul] networks are the two areas that we expect to be demand-drivers," he added.

"Both of these technology upgrades create ripple effects across the broader IP infrastructure. For example, 400Gbit/s upgrades in backbone networks will create a need for 100Gbit/s in edge and aggregation networks, either concurrently or in the future."

According to Dell'Oro, adoption of 400G technologies is expected to drive double-digit growth for the service provider core router market in 2021.

"The largest deployments will occur in North America," said Umeda.

The service provider core router market accounted for about a quarter of the total service provider router and switch market in Q1 2021, which, according to Dell'Oro figures, is consistent with the contribution for each of the past five years.

Vendor market shares (and chip shortages)

Umeda said vendor market share comparisons with Q1 2020 were not meaningful because of the disproportionate effect of the pandemic in different regions.

However, on a trailing four-quarter basis, Huawei and Cisco each hold a 30% revenue share of the worldwide service provider router and switch market. Nokia, Juniper, and ZTE combined account for a 34% share. No other vendor can muster more than a 2% slice of the market.


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What about the impact of chip shortages?

"Manufacturers of high-end routers are telling me that they have not been materially affected by component supply constraints", Umeda told Light Reading.

"Most of the routers vendors sell are a wide range of networking products that share common components. Because these routers are low volume, high margin products, the vendors generally plan to have an adequate supply of the custom ASICs. If necessary, other commonly used components can be reallocated from other higher volume product lines to ensure availability of the routers."

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— Ken Wieland, contributing editor, special to Light Reading

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