Worldwide Ethernet switch revenues grow 20.1% YoY to $44.2b

The worldwide Ethernet switch revenues grew 20.1% year over year in 2023 to $44.2 billion. In the fourth quarter of 2023 (4Q23) the Ethernet switch market grew 0.8%. The total worldwide enterprise and service provider (SP) router market recorded $16.4 billion in revenue in 2023, a year-over-year decline of 0.4%. The router market also saw a year-over-year decline of 12.7% in 4Q23, according to IDC.

Ethernet Switch Market Highlights
There were varying trends across the datacenter and non-datacenter portions of the Ethernet switch market. Revenues in the datacenter (DC) portion of the market rose 13.6% year over year in 2023 and were up 4.4% in 4Q23. Datacenter Ethernet switching made up 41.5% of the total market’s revenues, with the remaining in the non-datacenter portion.

Revenues for 200/400 GbE switches rose 68.9% for the full year in 2023 in the datacenter segment and grew 14.8% between the third (3Q23) and fourth quarters of 2023. 100GbE switches, which make up 46.3% of the datacenter segment’s market revenues, rose 6.4% for the full year but declined 3.0% sequentially from 3Q23 to 4Q23. ODM (original device manufacturer) Direct sales continue to be an important part of the datacenter segment, rising 16.2% year over year in 2023 to make up 14.3% of the datacenter segment’s revenues for the full year.

The non-datacenter (non-DC) segment of the Ethernet switch market grew 25.2% year over year in 2023, but declined 1.9% in 4Q23. With improved component availability, vendors are increasingly able to recognize revenues from fulfilling backlogged product orders, leading to high growth rates. In the fourth quarter, new product orders slowed as customers implemented heightened product inventory.

The non-DC segment, which includes lower-speed switches that are typically deployed in enterprise campus and branch locations, saw mixed results by speed. 1GbE, which made up 56.5% of the segment’s revenues in 2023, rose 24.2% for the full year, but declined 7.0% year over year in 4Q23. 10GbE switches, which made up 20.4% of the non-DC segment’s revenues in 4Q23, rose 5.3% for the full year, but declined 6.1% year over year in 4Q23.

From a geographic perspective, the total Ethernet switch market in the United States saw growth of 28.8% for the full year 2023 and 3.8% in 4Q23. In Western Europe, the market rose 19.3% for the full year, but declined 6.9% in 4Q23. In Central & Eastern Europe, the market grew 20.7% for the year and declined 1.6% in 4Q23. In the People’s Republic of China, the market was down 4.0% for full year 2023, but was up 9.1% in 4Q23. Across the broader Asia/Pacific region (excluding Japan and China), markets grew 15.0% in 2023, but declined 9.0% in 4Q23.

“The worldwide Ethernet switch market was dynamic in 2023, driven by a variety of trends, in particular by the impact of AI,” said Vijay Bhagavath, research vice president, C loud and D atacenter N etworks. “In the datacenter portion of the market, enterprises and service providers are building ever-faster Ethernet switch speeds to support rapidly maturing AI workloads. In the non-datacenter portion, Ethernet switch vendors are embedding AI capabilities in software management platforms to improve operations. Connectivity in general, and Ethernet switching in particular, are playing an increasingly critical role in supporting the era of AI everywhere.”

IDC