The worldwide Ethernet switch market exceeded USD 6.1 billion in revenue in the third quarter of 2015 (3Q15), an increase of 2.0 percent year-over-year and a healthy increase of 6.1 percent quarter-over-quarter. Meanwhile, the worldwide total enterprise and service provider (SP) router market could not repeat its exceptionally strong growth from last quarter and ended 3Q15 flat on an annual basis and down _êÆ7.2 percent quarter-over-quarter, according to International Data Corporation (IDC). From a geographic perspective, the 3Q15 Ethernet switch market performed best in North America, which grew a strong 8.2 percent year-over- year and 9.9 percent quarter-over-quarter. Asia/Pacific (excluding Japan) (APxJ) also increased a solid 3.9 percent year-over-year carried mainly by Korea (up 19.2 % year-over-year) and Hong Kong (up 13.4 % year-over-year). China also increased a healthy 3.6 percent year-over-year in 3Q15. Meanwhile, Australia experienced a down quarter and declined _êÆ5 percent year-over-year in 3Q15. Western Europe was flat to slightly positive with growth of 0.8 percent but with significant variance among country-level results. Ireland (up 31.7 %), Spain (up 10.5 %), France (up 9.8 %), and Netherlands (up 9.1 %) were the key contributing countries to the year-over-year growth, offsetting double-digit declines in Portugal, Italy, Denmark, and Norway. The Middle East and Africa (MEA) region declined a modest _êÆ1 percent year-over-year in 3Q15, but Latin America, Japan, and Central and Eastern Europe (CEE) regions were quite weak in 3Q15 declining _êÆ10 percent, _êÆ19.8 percent, and _êÆ22.5 percent year over year, respectively, in 3Q15.

10 Gb Ethernet switch (Layer 2/3) revenue decreased _êÆ1.6 percent year over year, coming in at USD 2.2 billion while 10 Gb Ethernet switch port shipments grew a robust 27.4 percent year-over-year with nearly 8.5 million ports shipped in 3Q15 as average selling prices continued to fall. 40 GB Ethernet revenue reached a record USD 644 million in 3Q15, growing 41.4 percent year over year. 10 GB and 40 GB Ethernet are expected to continue to be the primary drivers of the overall Ethernet switch market in the near-term. 1 GB Ethernet switch revenue declined slightly (_êÆ0.3 percent year-over-year) as this segment continues to face price erosion.

The worldwide enterprise and service provider router market was flat on a year-over-year basis in 3Q15 as the 1.1 percent annual increase in the service provider segment was offset by a _êÆ3.5 percent decline in enterprise routing. This will be a market to watch closely over the coming quarters as software-defined architectures start to take hold across the WAN, enabling enterprise network managers and service providers alike to benefit from these emerging capabilities.

"What we are now seeing is the strong growth of cloud, hosted and collaborative software solutions, which is introducing competition from non-traditional areas and causing market boundaries to blur."

Jeremy Duke

Founder and Chief Analyst,

Synergy Research Group

The combined enterprise and service provider router market saw a varied regional performance in 3Q15. MEA was by far the best performing region in 3Q15 with its 23.5 percent year-over-year growth, followed by 8.7 percent annual growth in Western Europe. Latin America (up 2.7 %), North America (down _êÆ1.8 %), and APxJ (down _êÆ2.6 %) were relatively close to the overall global market performance. But as in the Ethernet switch market, CEE and Japan significantly underperformed in 3Q15, declining _êÆ13.6 percent and _êÆ22.3 percent year-over-year respectively.

"Overall revenue and port shipment growth rebounded somewhat in 3Q15, even though the usually strong 10 Gb segment continued to see weakness in year-over-year revenues." At any rate, shipments of 10 Gb Ethernet and higher speeds is a testament to the strong demand to support a diverse array of enterprise and datacenter workloads and service provider infrastructure. Given this, we expect the market to remain relatively healthy but intensely competitive."

Rohit Mehra

Vice President,

Network Infrastructure, IDC


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