Carrier Router and Switch Market in 2011:
“The carrier router and switch market hit a record-high $14.5 billion in 2011, up 8% over 2010, making it the second largest telecom market segment after mobile RAN infrastructure,” notes Mr. Howard, Infonetics Research’s co-founder and principal analyst for carrier networks.
“Yet paradoxically, 2011 results show signs of a slowdown in the market’s overall growth rate,” Howard continues. “Why? Because despite continued double-digit percent annual growth in the largest market, Asia, and the smallest market, Latin America, the two mainstays of carrier routers and switches, North America and EMEA, are slowing. Still, the fundamental market drivers will pace the overall market forward, with growing fixed broadband traffic and exploding mobile broadband traffic on 3G and LTE networks pushing many service providers to upgrade their access, aggregation, and core networks, including mobile backhaul.”
North America was the only world region to post a decline in carrier router and switch spending both quarter-over-quarter in 4Q11 as well as for the full year 2011, despite the many economic growth signals in the U.S. Meanwhile, EMEA had a seasonally typical budget increase, with a 21% pop in router and switch spending, despite a poorer year and the ongoing euro/Greece/debt crisis. Ongoing network upgrade projects in South America and Mexico led to a banner year for service provider router and switch vendors in Latin America (revenue up 22% in 2011), and China and Japan propped up the market in Asia.
Service Provider Router and Switch Market Highlights:
- The global service provider router and switch market, which includes IP edge routers, IP core routers, and carrier Ethernet switches (CES), grew 11% sequentially to $3.9 billion in the final quarter of 2011
- In 4Q11, the IP edge segment (the sum of IP edge routers and CES), jumped 12% sequentially and is up 8% for the year.
- Cisco continues to lead the IP Edge segment by a healthy margin, commanding about a third of the global market in 2011, while its top competitors — Alcatel-Lucent, Huawei, Juniper, and ZTE all gained market share in 2011.
- Alcatel-Lucent’s strong performance propelled it into the #2 spot for global router revenue in 4Q11, and it retained #2 position for 2011 EMEA router revenue, despite not having a core router product.
- Recent trends in the carrier router segment are indicative of the overall router and switch market: with the exception of 2009 during the height of the recession, router sales grew by double-digit percents each year until 2011, when they increased a relatively lower 9.9%.
Carrier Ethernet Market Status and Forecast:
In mid November 2011, Infonetics Research increased its Carrier Ethernet equipment forecast to $40.2 billion by 2015. At that time, the company stated they expect the global carrier Ethernet equipment market to finish 2011 up 15.7% to $32.0 billion, following a 30.5% hike in 2010. Service provider investment in carrier Ethernet equipment continues to outpace overall telecom capex, which Infonetics expects to be up 6% in 2011.
- Carrier Ethernet Equipment market is booming with $37.5B worldwide revenues forecasted for 2015. The cumulative 2005 to 2010 CE market was $101B.
- Ethernet dominates worldwide mobile backhaul carrier spending with $6.4B or 91% of the 2011 mobile backhaul equipment market (that’s Ethernet over copper, microwave or fiber between the cell tower and the long haul carrier/ISP point of presence, and on to the controller site and/or mobile switching center. In 2012, Ethernet based mobile backhaul accounts for 40% of physical connections of all types of mobile/cellular backhaul (e.g., TDM, IP, etc) in the world. It’s projected to be 95% of the mobile backhaul connections market by 2015.
- Network Operator Carrier Ethernet services (Ethernet Private Line, Virtual Private Line, Virtual Private LAN, Ethernet as access for IP VPNs) will be a $49B worldwide market in 2015. [this includes both retail and wholesale]. The cumulative 2010-2015 Carrier Ethernet market (total sales) is expected to be $93B.
- Big growth is foreseen for CE: Routers, Switches and optical networking/transport (Ethernet over DWDM) equipment. Ethernet over microwave growth is accelerating.
After many years of slow growth, it’s great to see the Carrier Ethernet market now “booming.” Note that the MEF has been in existance for 10 years and that the IEEE 802.3ah Ethernet First Mile (EFM) standard was completed in 2003. Yet the Carrier Ethernet market really didn’t start to ramp till 2010 or 2011.
It is somewhat surprising that mobile network operators are using Ethernet based backhaul when they still have so much TDM based cellular voice (even though mobile data traffic has now eclipsed voice, it’s voice that pays most of the bills). We see tremendous promise and potential for Ethernet over fiber backhaul for the exponentially growing 4G mobile data traffic. That assumes that carriers like AT&T make good on their promise to bring fiber all the way to cell towers that handle significant 3G/4G mobile data traffic.