Service provider router market to scale to $77B

Aug. 10, 2023
A new Dell’Oro report reveals that the improved component supply drives strong market growth in 2023.

Service provider routing is on the upswing. Dell’Oro forecasts that cumulative revenues spent on Service Provider (SP) Routers and Switch equipment are projected to approach $77 billion over the next five years.

The research firm said that this growth pattern represents a 9% increase compared to the cumulative revenue of the previous five-year period, propelled mainly by a combination of applications driving higher volumes of traffic, such as the proliferation of 5G on mobile networks, residential broadband shifting to higher speed Cable, and PON, and increased use of video.

“Although we’ve seen strong market growth in 2023, double the normal growth rate, we expect it to be short term,” said Ivaylo Peev, senior analyst at Dell’Oro Group. “Vendors have been building backlog for two years, and the recent strong growth is a result of improved component supply, which enabled vendors to release large quantities of product into the market.”

Peev added that hyperscalers and cloud service providers drove sales this year.  

“We saw robust sales to hyperscalers in North America at the beginning of 2023,” he said. “Large Cloud SPs deploy routers to interconnect geographically dispersed facilities, connect to Telecom SP wide area networks, and connect inside the data centers. However, we believe the surge in sales to Cloud SPs has passed its peak and will slow over the forecast period. Cloud SPs have heavily invested in 400 Gbps infrastructure in the last few years and are well prepared for AI workloads.”

Other factors that will drive growth will be service provider expansion of mobile backhaul networks followed by broadband expansion. Fiber-based broadband deployments will result in what Dell’Oro says will be “significant traffic increases.” Also, broadband providers will continue upgrading Edge Routers to support faster speeds and lower latency.

Another critical area of growth is disaggregated routers. A disaggregated router is an open approach to routing where the customer can choose hardware and software from a range of vendors that best meets their needs. This open approach enables innovation, avoids vendor lock-in, and drives costs down.

The research firm said that disaggregated router sales are “gaining share, and we anticipate this trend to continue throughout our forecast horizon.” Additionally, existing service provider projects at AT&T, Turkcell and KDDI are moving forward, and new use cases are moving from testing to production. 

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About the Author

Sean Buckley

Sean is responsible for establishing and executing the editorial strategies of Lightwave and Broadband Technology Report across their websites, email newsletters, events, and other information products.

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