AI drives the Ethernet switch market

The global Ethernet switch market grew by 20.1 per cent year-on-year in 2023, totalling US$44.2 billion. This growth was driven by several trends, in particular the impact of Artificial Intelligence (AI), according to data from the International Data Corporation (IDC).

The research points out that, specifically in the datacenter segment, companies and service providers are looking for ever faster Ethernet switch models to support the processing of fast-growing AI workloads. In other sectors outside the datacenter universe, AI has not been left out either, with Ethernet switch vendors using it to incorporate intelligent features into management platforms to improve operations.

“Connectivity in general, and Ethernet switches in particular, are playing an increasingly critical role in supporting the AI era worldwide,” says Vijay Bhagavath, research vice president for Clouds and Networks for Data Centers at IDC.

Revenue in the datacenter portion of the global Ethernet switch market grew by 13.6% in 2023, year-on-year. This segment accounted for 41.5% of the total market. The 200/400 GbE switch models grew by 68.9% in terms of revenue in 2023 in the datacenter segment. 100GbE switches, which account for 46.3% of market revenue in the datacenter segment, grew by 6.4% in the period. According to IDC, direct sales from ODMs (original device manufacturers) continue to be an important part, growing 16.2 per cent year-on-year in 2023 and accounting for 14.3 per cent of revenue in the segment.

In the share outside the datacenter universe (non-DC), the Ethernet switch market grew by 25.2% year-on-year in 2023. With the greater availability of components, suppliers were able to fulfil backorders, leading to high growth rates.

This segment, which includes low-speed switches that are typically deployed in corporate campuses and branch offices, showed mixed results when it came to models with different speeds. 1GbE models accounted for 56.5 per cent of the segment’s revenue in 2023 and grew by 24.2 per cent year-on-year in terms of revenue. 10GbE switches accounted for 20.4 per cent of the segment’s revenue and grew by 5.3 per cent in 2023.

When it comes to geographical regions, the total Ethernet switch market in the United States grew by 28.8 per cent in 2023. In Western Europe, the market grew by 19.3 per cent in the same period. In central and eastern Europe, the increase was 20.7 per cent last year. In China, the market fell by 4.0 per cent in 2023, while in the wider Asia/Pacific region (excluding Japan and China), the market grew by 15.0 per cent in 2023.

Router market going against the grain

While the worldwide Ethernet switch market enjoyed robust growth in 2023, the router market suffered a slight decline, according to IDC. The service provider segment, which includes the communications and cloud areas, accounted for 76.6 per cent of the total router market. This segment’s revenue increased by 1.4 per cent in 2023, while the business sector, which represents the remaining portion of the market, fell by 6.1 per cent in the period.

World’s fastest Ethernet switch

Broadcom recently announced its new Bailly, the first co-packaged optical (CPO) Ethernet switch with a speed of 51.2 terabits per second (Tbps) and the ability to operate with 70 per cent lower power consumption, as well as offering an 8x gain in silicon area efficiency compared to pluggable transceiver solutions.

The manufacturer emphasises that optical interconnection is critical for front-end and back-end networks in large-scale Generative AI clusters. Today, pluggable optical transceivers consume around 50 per cent of the energy in systems and make up more than 50 per cent of the cost of traditional switching systems. The growing bandwidth demands of the new generation of GPUs and the ever-increasing sizes of AI clusters require super-efficient optical interconnects in terms of energy consumption and cost that go beyond discrete solutions.

“Bailly will enable hyperscalers to deploy low-power, cost-effective, large-scale compute clusters and AI systems. Broadcom’s technology leadership and manufacturing innovations have helped the new Bailly deliver 70 per cent better energy efficiency and ensure an optical I/O roadmap capable of keeping up with the future bandwidth and power demands of AI infrastructures,” says Near Margalit, vice president and general manager of Broadcom’s optical systems division.