The worldwide Ethernet switch market (Layer 2/3) exceeded US$6.4 billion in revenues in the fourth quarter of 2015, an increase of 3.2% on year and a healthy increase of 5.1% on quarter. For full-year 2015, the market increased 1.9% over 2014. Meanwhile, the worldwide total enterprise and service provider (SP) router market also improved in the fourth quarter of 2015, growing 4% on year and up 9.9% on quarter. For the full year, the router market was up 5.6% over 2014, according to IDC.
From a geographic perspective, the fourth-quarter-2015 Ethernet switch market performed best in Asia Pacific excluding Japan, which increased 10.2% on year and 14.4% on quarter carried mainly by Singapore (up 32% on year) and South Korea (up 19.7% on year). For the full year, the Asia Pacific market excluding Japan rose 4.8%. North America also recorded a strong fourth quarter, increasing 8% on an annual basis and 6.9% sequentially. The US was the primary driver of growth, increasing 8.7% on year and 7% on quarter.
No other region saw an on-year increase in the fourth quarter of 2015. Western Europe was just below flat, decreasing 1.2% on year, despite improving 7.6% sequentially. Standouts in the region included Ireland (up 48.5% on year) and Switzerland (up 10.1% on year). For the full year, Western Europe increased 0.8% over 2014. Latin America also had a poor showing, contracting 2% on year in fourth quarter, despite a 35.5% sequential surge. Latin America was down 3.8% for the full 2015.
The Middle East and Africa (MEA) region declined 5.1% on year in the fourth quarter of 2015, although Qatar recorded a 13.7% on-year increase. For the full year, MEA was up 3.4% over 2014. Central and Eastern Europe continued to see declines, contracting 14.8% on year in the fourth quarter and 18.3% for the full year, despite a 14.9% sequential increase. However, bright spots were seen in the Czech Republic and Hungary, both of which grew 12.4% on year in the fourth quarter of 2015. Japan also experienced continued declines, decreasing 18.1% on year in the fourth quarter and 22.5% for the full year.
"The seasonal fourth quarter spike was alive and well in 2015, helping the market to achieve respectable growth," said Rohit Mehra, vice president, Network Infrastructure, at IDC. "At the same time, price erosion continues to obscure the rapidly increasing demand for switching infrastructure to meet the explosive needs of cloud and mobility across service provider and enterprise segments. We expect the market to remain competitive as vendors look to new strategies to offset lower average selling prices."
10Gb Ethernet switches (Layer 2/3) were essentially flat on year, coming in at US$2.3 billion while 10Gb Ethernet switch port shipments grew 33.3% on year with nearly 9.5 million ports shipped in the fourth quarter of 2015 as ASP continued to fall. For the full 2015, the 10Gb Ethernet market declined 2.1% on year, finishing just under US$8.6 billion, with shipments increasing 26% over the period. 40Gb Ethernet revenues reached a record US$716.4 million in the fourth quarter of 2015, growing 27.6% on year. For the full year, 40Gb Ethernet finished at US$2.44 billion, representing a 48.4% increase over 2014. 10Gb and 40Gb Ethernet are expected to continue to be the primary drivers of the overall Ethernet switch market in the near term as leading vendors and service providers prepare for the introduction of 25/100 GB Ethernet. 1Gb Ethernet switch revenues increased slightly (1.4% on year) as shipment strength offset continuing price erosion. However, for the full year, 1Gb Ethernet switch revenues declined 0.7% over 2014.
The worldwide enterprise and service provider router market grew 4% on year in the fourth quarter of 2015 with a 3.9% increase in the service provider segment and a 4.4% increase 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 (software-defined WAN), enabling enterprise network managers and service providers alike to benefit from these emerging capabilities. For the full year 2015, the worldwide enterprise and service provider router market grew an impressive 6.7% compared to 2014.
The combined enterprise and service provider router market saw a varied regional performance in the fourth quarter of 2015 and for the full 2015. Latin America was by far the best performing region in the fourth quarter of 2015 and for the full year, seeing increases of 21.5% and 19.7%, respectively. MEA followed with 14.2% on-year growth in the fourth quarter of 2015 and was up 20.6% for the full year. North America grew at 7.7% on year and 6.2% for the full year. Western Europe came in at about the market rate in the fourth quarter of 2015 (up 4.1%) and recorded strong full year growth of 8.6%. Despite positive growth for the full 2015 (up 3.7%), the Asia Pacific market excluding Japan recorded a decline of 2.7% on year in the fourth quarter of 2015. Similar to the previous quarter, CEE and Japan significantly underperformed in the fourth quarter of 2015, declining 4.9% and 21.59% on-year and 7.8% and 21.1% for the full year, respectively.
Vendor highlights
Cisco finished the quarter with 1% on-year growth in the Ethernet switching market and market share of 59.2%, down from its 61.6% share in the third quarter of 2015. For the full year 2015, Cisco grew 2.2% and recorded 60.7% market share. In the hotly contested 10GbE segment, Cisco held 56.1% of the market in the fourth quarter of 2015, down from 59% in the previous quarter. For the full 2015, Cisco recorded 58.4% share of 10Gb Ethernet revenues, compared to 61.1% in 2014. Cisco's service provider and enterprise router revenues increased 2.1% on year, while increasing 6% for the full year.
Hewlett Packard Enterprise's (HPE) Ethernet switch revenues rose 1% on year in the fourth quarter of 2015, while declining 2% for the full 2015. HPE's market share stands at 9.2% in the fourth quarter of 2015, slightly up from its 9% share in the third quarter of 2015. For the full year 2015, HPE declined 2% and recorded 9% market share.
Juniper had another record quarter in Ethernet switching with an on-year increase of 32% and sequential growth of 5.8% in the fourth quarter of 2015. For the full 2015, Juniper grew 16.7% in the Ethernet switch market. Juniper also saw healthy router revenue growth in the fourth quarter of 2015: 18.8% on an annualized basis, 4.9% sequentially, and 3.4% for the full year.
Huawei continued to perform well in both the Ethernet switch and the router markets. Huawei's Ethernet switch revenues grew 39.3% on year in the fourth quarter of 2015 (on the strength of 66.4% sequential growth), while increasing 34.9% for the full 2015. Huawei enterprise and SP router revenues increased 0.8% on year in the fourth quarter of 2015 and saw a full-year increase of 22.1%.
"We are seeing varied geographic growth trends indicating that regions are in different points of their third Platform journey viz-a-viz network infrastructure," said Petr Jirovsky, research manager in IDC's Networking Trackers Group. "The emergence of speeds such as 2.5/5 Gb, 25/50Gb Ethernet, along with 100Gb Ethernet to tackle customer demands around cloud buildouts, IoT, and mobility infrastructure promises an interesting market transition in the coming years."
