Improving supply chains coupled with unrelenting demand from cloud service providers kept the data center switching market on a positive trajectory in the third quarter.
Data center switch sales grew 20 percent year over year in the third quarter, the highest rate so far this year, according to a Dell’Oro Group report released on Friday. That is, excluding Europe, Middle East and Africa (EMEA).
While North America, China and Asia Pacific all reported double-digit growth in data center switching, EMEA saw a decline in switching revenue during the quarter. Much of this is the result of ongoing supply chain constraints in the region combined with slowing demand amid strong macroeconomic headwinds and rising energy prices, Dell’Oro analyst Sameh Boujelbene said The registry.
Perhaps unsurprisingly, cloud and hyperscale customers accounted for the lion’s share of growth in the data center switching market, driving adoption of 200 Gbps and 400 Gbps network devices to nearly two million units. And although 200 Gbps and faster switches accounted for just 10 percent of global shipments, they generated 20 percent of quarterly revenue in the third quarter, the report said.
Boujelbene anticipates that 200Gbps and 400Gbps switches will continue to enjoy good adoption from cloud providers and hyperscale customers in the new year despite deteriorating economic conditions.
While some cloud and hyperscalers have announced hiring freezes and layoffs amid slowing demand, many, including Amazon and Meta, have spurred data center expansion and infrastructure investments.
With that in mind, Boujelbene says the vast majority of switching sales continue to be for 25 Gbps and 100 Gbps devices, which have become the bread and butter of enterprise networks in recent years. And that won’t change anytime soon. Given the price parity with 40Gbps switching hardware, she explains that many companies have chosen to future-proof by buying 100Gbps switches and pairing them with slower, cheaper optics.
While sales remained strong in the third quarter, Boujelbene emphasized that this was less a reflection of demand during the quarter and more a side effect of last year’s long backlog. Most of the revenue reported this quarter can be attributed to sales made more than six months ago, she explained.
These backlogs are, of course, the direct result of the semiconductor shortage, which, despite signs of improvement, is far from over.
According to Boujelbene, switch delivery times have dropped significantly in recent months, from more than a year to 30-40 weeks. Looking ahead, she expects the order backlog to clear up around the middle of next year. ®
https://www.theregister.com/2022/12/03/datacenter_switching_q3/ Data center switching increased everywhere but Europe • The Register