According to recently published analysis from Dell’Oro Group, the Service Provider (SP) Router and Switch market is projected to expand through 2027, with market revenues growing at a 2 percent compounded annual growth rate (CAGR) from 2022 to 2027.
The market researcher for the telecommunications, security, networks, and data center industries expects global cumulative market revenues to approach $77 billion by 2027.
The analyst's latest report forecasts that wide adoption of 400 Gbps technology-based equipment will persist as the key driving force of market growth, and that telecommunication and cloud SPs will steadily continue investing in network upgrades to accommodate increasing traffic levels -- and to benefit from the economic efficiency of 400 Gbps technology.
As explained by Ivaylo Peev, senior analyst at Dell’Oro Group:
"Our forecast growth projections remain largely unchanged compared to our previous forecast. We anticipate continuing market uncertainty and worsening macroeconomic conditions in the first few years of the forecast period as economists are projecting a high possibility of recession in Europe and North America."
"However, we expect the global SP router and switch market to stabilize in the second half of the forecast period, as we assume that the underlying fundamentals of the SP router market remain healthy."
Dell'Oro's Service Provider Router and Switch 5-Year January 2023 Forecast Report emphasizes that 400 Gbps-capable routers built on the newest generation of high-capacity ASICs offer the benefits of higher speeds per port with decreased energy consumption, thus reducing the total number of ports required and, in turn, the size of the chassis.
As noted by the analyst, the higher-speed per port also lowers the cost per bit per port.
Combined with the reduced energy consumption and the smaller, rack space-saving format of the router, transitioning to 400 Gbps ports enables SPs to make more economically efficient investments and lower operating costs, reckons Dell'Oro.
Meanwhile, in its SP Core Router segment analysis, the analyst expects revenue to increase at a 4 percent CAGR from 2022 to 2027 -- and growth to be largely driven by the adoption of 400 Gbps technology.
For its part, the combined SP Edge Router and SP Aggregation Switch segment is forecast to grow at a 1 percent CAGR, approaching $12 billion in 2027.
The report finds the dominant growth driver in the segment will remain the expansion of mobile backhaul networks to support the adoption of 5G radio access networks (RAN), followed by increasing residential broadband deployments.
Elsewhere in the report, Dell'Oro projects a decline in the IP mobile backhaul market in China, with SPs shifting their investments to core and metro networks. "We expect increasing demand for SP Core Router products as a result," adds the analyst's statement.
Learn more about the report.
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