Amid favorable market conditions created by the COVID-19 pandemic, cloud service providers (CSPs) have begun large-scale deployments of programmable Ethernet adapter and supercharged the Ethernet adapter market, driving a 47 percent year-on-year growth in the first quarter. The market topped $552 million during the first three months of 2020, a record quarter, according to Omdia.
Consumers, first in Asia and then in Europe and North America, turned to cloud services for entertainment, social interaction, and learning while in lockdown. Enterprises, equally, increased their reliance on cloud services as they temporarily closed offices and set up their employees for remote working. Some enterprises also saw cloud services as a cost saving measure they could use to offset lower revenues, avoiding high initial data center IT capex.
The societal and business shift toward cloud services drove a surge in server and Ethernet adapter investment at cloud service providers (CSPs). Simultaneously, many CSPs accelerated deployments of programmable network interface cards (NICs), driving up average revenue per port in the quarter. Broadcom, Xilinx, and Marvell all reported a surge in CSP demand for 25GE programmable NICs. As a result, 25GE Ethernet adapters represented more than 35 percent of total data-center Ethernet adapter ports in the first quarter of 2020, as reported by Omdia’s Ethernet Network Adapter Equipment Market Tracker.
“Offloading virtual network functions like virtual switching and encryption is appealing to CSPs as it can free-up CPU cores enabling a higher number of virtual machines (VMs) or containers per multi-tenant server,” said Manoj Sukumaran, senior analyst for data center compute, at Omdia. “This can help CSPs increase the amount of revenue they generate from each server in their fleet.”
The data center Ethernet adapter revenue outlook
Omdia forecasts data center (DC) Ethernet adapter equipment revenue to grow 20 percent in 2020 with growth accelerating through 2024, driven by server shipments and the adoption of higher speed offload and programmable adapters. This market is poised to hit $4.4 billion by 2024.
Ethernet adapters that have an onboard field customizable processor such as a field-programmable gate array (FPGA) or system on chip (SoC), will account for over half of the total market revenue in 2024, or $2.3 billion. Offload adapters that can provide complete on-card processing of network, storage or memory protocols, data-plane offload or that can offload server memory access will account for about 44 percent of 2024 adapter revenue, totaling over $2 billion. Adapters that only provide Ethernet connectivity will make up a minority share of the market, at just $188 million in 2024.
NVIDIA (Mellanox) takes the lead
In the first quarter of 2020, NVIDIA became the top vendor with 24.6 percent of revenue share, gaining a 5-percentage-point lead on Intel, which held 19.3 percent share of Ethernet adapter revenue. This is NVIDIA’s highest Ethernet adapter revenue quarter ever and the highest quarterly revenue recorded by any vendor since Omdia began tracking this market. It is worth noting that apart from Ethernet adapters, Intel supplies Ethernet controllers (which get soldered directly onto the motherboard) to server vendors. It also sells Ethernet controllers to third-party adapter vendors such as Silicom. In the first quarter of 2020, Intel shipped over $100 million worth of Ethernet controllers on top of its Ethernet adapter business.
NVIDIA benefited from CSPs and enterprises increasing their Ethernet adapter investment, in line with servers. The 25GE and 100GE offload adapters were bright spots for the company. Omdia also saw signs of increased interest in NVIDIA’s Bluefield programable NICs. NVIDIA also made the first-ever shipment of 200GE offload NICs.
Intel’s Ethernet adapter portfolio continued to be made up of NICs, which do not offer complete on-card processing of network, storage, or memory protocols—a disadvantage for the vendor. Intel’s new 800 adapter series, called Columbiaville, which was announced in April 2019, has multiple offload features. However, it has not yet hit the market, and Intel is losing out because of the delay. The vendor continues to lead the market in terms of the number of ports shipped.
Broadcom took the third spot in the Ethernet adapter market with a 16.1 percent revenue share. Broadcom’s revenue growth was driven by strong demand for high-speed offload and programmable adapters at hyperscale CSPs. Microsoft and Amazon continued to adopt in-house-developed Ethernet adapters, making them the fourth and fifth largest makers of Ethernet adapters in the first quarter of 2020. Microsoft was in fourth place with 13.6 percent, with revenue driven by increased demand for its cloud services, which deploy FPGA-based programmable NICs. Amazon rounded out the top five with 7.8 percent revenue share.