Service provider router and switch market to maintain growth through 2027: Dell’Oro

Sales of service provider (SP) routers and switches should enjoy a compounded annual growth rate (CAGR) of 2% from 2022 to 2027, according to a new report from Dell’Oro Group. The wide adoption of 400G-enabled platforms will cause the market to approach $77 billion by 2027, the market research firm predicts in its new Service Provider Router & Switch Report.

"Our forecast growth projections remain largely unchanged compared to our previous forecast," commented Ivaylo Peev, senior analyst at Dell’Oro Group. "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," added Peev.

The move to 400G ports will come both because of increasing traffic demands and the improved economies they provide, Dell’Oro explains. New generations of high-capacity ASICs offer not only higher speeds per port but decreased energy consumption as well. The combination reduces the total number of ports required and, in turn, the size of the chassis. The per-port speed increase also lowers the cost per bit per port, Dell’Oro adds. The move to 400G ports thus enables SPs to make more economically efficient investments and lower operating costs, according to the analysts.

Dell’Oro sees growth in both core and edge applications, with the SP core router segment revenues expected to increase at a 4% CAGR from 2022 to 2027 and the SP edge router and SP aggregation switch segment forecasted to grow at a 1% CAGR to approaching $12 billion in 2027. The need to support expanded 5G mobile backhaul will drive the latter segment along with a push from residential broadband deployments. That said, Dell’Oro also expects a decline in the IP mobile backhaul market in China. SPs there will shift their spending to core and metro networks, which will boost SP core router shipments as a result.

Dell’Oro’s Service Provider Router & Switch Report covers the SP router and switch market for future, current, and historical periods. The report includes qualitative analysis and statistics for manufacturing revenue by region, customer type and use cases, average selling prices, and unit and port shipments.

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