Service Provider Router and Switch Market Reaches Record $4.1 Billion in 2Q 2023

The worldwide Service Provider (SP) Router and Switch market achieved a historic milestone, surpassing $4.1 billion in revenue for the first time — in the second quarter of 2023, according to a report by Dell’Oro Group.
Kazakhstan mobile network
This remarkable growth was attributed to the availability of components and robust demand from hyperscale enterprises. Notably, the EMEA and China markets saw substantial double-digit growth, supported by large regional projects.

Ivaylo Peev, Senior Analyst at Dell’Oro Group, commented on the remarkable growth, stating, “The 2Q 2023 SP Router Market revenue growth surged by 16 percent year-over-year, exceeding the exceptional growth of the previous quarter.”

“This growth was sustained by vendors’ ability to address backlogs and fulfill orders, thanks to improved component supply. Additionally, the unwavering demand for SP routers from hyperscale companies in North America significantly contributed to this extraordinary market expansion.”

EMEA and China exhibited double-digit growth, reversing their relatively weak performance over the past two years. EMEA’s growth was driven by various new projects in Middle Eastern and African countries, including use cases in Benin, Ethiopia, Morocco, Saudi Arabia, South Africa, UAE, and Turkey.

In China, major investments from the three largest operators – China Mobile, China Unicom, and China Telecom – fueled large-scale deployments across metro cloud networks, broadband access networks, mobile RAN, and mobile backhaul, contributing significantly to the quarter’s success.

China’s Unexpected Re-emergence: China’s resurgence in the market was surprising, with the most substantial growth occurring in the SP Edge Router and Aggregation Switch segment. This growth defied expectations of a shift towards SP Core and Metro networks, which would have driven demand for SP Core Routers.

Strong Growth in SP Core Router Segment: The SP Core Router segment led the market’s growth, surging by 26 percent year-over-year, followed closely by the combined SP Edge Router and Aggregation Switch segment, which witnessed a 13 percent year-over-year increase.

Market Share Gains: In the overall SP Router market, Cisco and ZTE gained market share. Huawei, on the other hand, expanded its market share in the combined SP Edge Router and Aggregation Switch segment while ceding some share in the SP Core Router segment.

Huawei and ZTE’s Growth in EMEA: Huawei and ZTE both experienced growth in the EMEA region. Huawei expanded its presence in Western European countries, including Italy, Luxembourg, Portugal, and Spain.

The Service Provider Router and Switch market’s impressive growth in 2Q 2023 underscores the resilience of the industry in the face of supply chain challenges and highlights the increasing demand for networking infrastructure in various regions worldwide. With the ongoing expansion of hyperscale networks and regional projects, the market is expected to continue its upward trajectory in the coming quarters.

IDC report

IDC earlier said Cisco continues to assert its dominance, not only in Ethernet switches but also in the service provider and enterprise router segment. Cisco’s combined service provider and enterprise router revenue witnessed an 18.1 percent growth in the second quarter of 2023, granting Cisco a substantial market share of 35.9 percent.

Huawei showed resilience and growth in this segment, with combined service provider and enterprise router revenue rising by 10.8 percent. This led to a noteworthy market share of 33.3 percent for Huawei in the second quarter.

H3C faced a challenging period, with revenues declining by 10.0 percent in the combined service provider and enterprise routing market. As a result, H3C’s market share dipped to 2.0 percent.

Juniper, a well-known name in the industry, experienced a modest 2.5 percent year-over-year growth in routing revenue during Q2 2023, securing a market share of 10.3 percent this quarter.

Router Market Highlights

In the router market, the service provider segment, encompassing communications and cloud service providers, accounted for a significant 77.5 percent of the market’s total revenues in 2Q23. This segment witnessed a healthy 14.8 percent year-over-year revenue increase, whereas the enterprise segment experienced a decline of 6.1 percent in the same period.

From a regional standpoint, the combined service provider and enterprise router market in the Americas grew by 10.3 percent, and in the Asia/Pacific region, the market expanded by 3.0 percent year over year. In the Europe, Middle East & Africa (EMEA) region, the market demonstrated substantial growth, with an 18.3 percent year-over-year increase in 2Q23.