Growth in service provider router and switch sales was nothing less that “extraordinary” in the first quarter of 2023, according to Dell’Oro Group. Strong demand from hyperscalers and an easing of component supply constraints contributed to the unexpected results, the market research firm states in its new 1Q 2023 Service Provider Router and Switch Report.
Dell’Oro reports double-digit market increases in all regions except EMEA, which declined. North American spending led the market, followed by the Caribbean and Latin America (CALA) and Asia Pacific.
“We were caught by surprise as revenues blew through the roof, growing 15% year-over-year. Only three times in the past 12 years has the SP Router market increased at this rate. For over two years, component supplies have constrained vendors’ ability to fulfill orders, and orders were piling to record levels,” said Ivaylo Peev, senior analyst at Dell’Oro Group.
“We have seen particular strength recently from hyperscalers in North America, which deploy routers to interconnect geographically dispersed facilities, to connect to Telecom SP wide area networks, and to connect inside the data centers,” continued Peev. “Within the data center, we are seeing a significant increase towards high-speed network connectivity such as 200-Gbps and 400-Gbps Ethernet switch deployments, which in turn have a cascading effect on the network core.”
The top router manufacturers benefited the most from the popularity of such high-speed ports. For example, Cisco gained two share points during the quarter, achieving its greatest market share since 1Q 2019. Meanwhile, Juniper Networks, Ciena, and ZTE gained share within the edge router segment.
“For the short-term outlook, we may see another quarter of strong growth, but do not expect it to be sustainable as customers need time to digest inventory, and the bulk of the market deployments come from Telecom SPs which refresh their networks at a steady pace,” Peev stated.
Dell’Oro’s Service Provider Router & Switch Report covers the service provider router and switch market for current, future, and historical periods. The report includes qualitative analysis and detailed statistics for manufacturing revenue by region, customer type, use cases, average selling prices, and unit and port shipments.
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