100G won, 40G lost in service provider market

1g-ports-revenue-forecastService providers are shifting from 10G to 100G, and shipments of interim 40G to service providers are plummeting, according to the IHS Markit networking ports report.

However, this is more than made up for by surging 40G shipments into the data center market. “We expect this to last through 2017, after which the data center market makes the transition to 100G as well,” said Matthias Machowinski, senior research director, enterprise networks and video, IHS Markit.

100G port shipments almost doubled in 2015, benefitting from surging service provider demand for 100G WDM and from enterprise and data center deployments, which grew significantly at the end of 2015 as low-cost optics came to market. In 2016, enterprise/data center 100G shipments will exceed those to service providers.

IHS Markit said the worldwide 1G port revenue peaked in 2015 and will continue to decline.

Globally, 1G/2.5G/10G/25G/40G/100G port shipments increased 32 percent in 2015 to 743 million, and revenue grew 6 percent to $46 billion, driven by growth in network traffic and the need for constant network upgrades. “Through 2020, we expect average annual revenue growth of 3 percent in port shipments,” said IHS Markit.

1G delivers the bulk of ports and 10G delivers the bulk of revenue, but both segments are maturing and are no longer the growth engines of the 1G/2.5/10G/25G/40G/100G market. Instead, growth is coming from the newer 2.5G, 40G and 100G segments.

Despite their diminishing revenue contribution 1G ports will play a crucial role in driving overall port growth as service providers and enterprises upgrade their access networks to 1G speeds.

Port growth is being impacted by the move to high-density solutions that allow a single higher-speed port to serve multiple lower-speed links. Revenue growth is being affected by the transition to 25G/100G.

High-speed port revenue growth will pick up again, with revenue projected to reach $39 billion in 2020 — a 2015–2020 compound annual growth rate (CAGR) of 8 percent. By 2020, IHS Markit expects the number of annual high-speed port shipments to exceed 154 million.