DATA CENTER SWITCH MARKET ANALYSIS

The global data center switch market size was valued at US$ 15,260 million in 2022 and is anticipated to witness a compound annual growth rate (CAGR) of 5.42% from 2023 to 2030. The global data center switch market is expected to witness substantial growth in the near future. The growing demand for data and cloud services is driving the data center switch market. Furthermore, the increased number of data centers and the emergence of edge computing are also anticipated to fuel the growth of the data center switch market. Several technological advancements are also driving the growth of this industry.   

Global Data Center Switch Market: Regional Insights

North America among regions is expected to dominate the global data center switch market over the forecast period. The demand for colocation data center is increasing from social media companies and cloud providers in the region. Along with this, the adoption of novel technologies including 5G infrastructure, vehicle technology, blockchain technology, and virtual reality communities is creating demand for data center. Moreover, the adoption of a hyper-converged infrastructure platform is also increasing in the region. These factors are expected to drive growth of the market in North America region.

Furthermore, Asia Pacific is anticipated to witness strong growth in the global data center switch market over the forecast period. The demand for data center switch market is growing significantly in this region. Countries in this region are focusing on development of next-generation networking technologies for building advanced infrastructure in 5G and Datacenters. For instance, government of China launched a three-year plan for the data center industry, which demands to increase efficiency of new facilities, having a PUE 1.3 and use 60% by the end of 2023. Moreover, countries across the region are deploying ARM based services. These factors are in turn creating demand for data center switches in the region, which is likely to support the market growth in the near future.

Figure 1. Global Data Center Switch Market Share (%), By Region, 2022

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Global Data Center Switch Market Drivers:

Rise in demand for cloud and edge computing services to boost the market growth

Due to the Covid-19 pandemic, several schools, enterprises, and offices were shutdown, which increased demand for cloud solutions and services all over the world. Many public and private sectors adopted work from home culture, which in turn created significant demand for SaaS-based collaboration solutions for employees to use for communicating with one another. Thus, due to these factors demand for cloud-based solutions increased, which further boosted the adoption of data center switches. Hence, the global data center switch market is expected to witness strong growth over the forecast period.

Increasing government regulations about localization of data centers to augment the market growth

Data localization involves restricting the data flow from one country to another. Many governments around the world are now implementing localization laws that make it compulsory for organizations, who collect critic consumer data, to store and process it in data centers that are within the boundary of the country. Such laws support developments of local data centers inside the country, and this in turn is leading to growing investment in data centers. Thus, the demand for data center switches is increasing all over the world due to government regulations, which is anticipated to fuel growth of the market.

Global Data Center Switch Market Opportunities:

Growing adoption artificial intelligence (AI) in data center is expected to offer growth opportunities in the global data center switch market over the forecast period. Ai can be used in mechanical and electrical equipment of data centers including data center switches. This for enabling actionable insights and automation, and to save money for operators. It requires integration of traditional physics-based modeling approaches with state-of-the-art machine learning (ML) techniques that use data from the IoT sensors. Several companies are launching Ai-driven data center switches to enhance network operations. This in turn is creating many lucrative opportunities in the market.

Furthermore, advent of 5G is anticipated to create lucrative environment for growth opportunities in the global data center switch market over the forecast period. With the emergence of 5G, novel applications such as industrial IoT process control, high-resolution cloud gaming, and onsite augmented reality guidance for workers using 5G super high speed, and machine-machine communication are also increasing. Due to such applications, the 5G rollout is likely to impact several industries including virtualized networking and data center infrastructure. This is in turn is expected to create demand for data center switch, which is likely to create opportunities in the global data center switch market.

Global Data Center Switch Market Trends:

Growing adoption of fiber optics is a recent trend

Fiber optics will be playing an important role to enable speed migration of data center switches. For instance, according to the Dell’Oro Group, optics for 400Gbps speeds and higher will compose nearly 60-70% of network expenditure, due to the rise in their cost. This in turn is leading to market vendors switching to fiber optics to cover a larger share of network expenditure. Thus, growing adoption of fiber optics is a major trend in the global data center switch market, which is expected to fuel the market pace in the coming future.

Market players focusing on offering higher bandwidth switches is growing trend

Market players are increasing involved in introducing higher bandwidth switches, which is likely to boost the global data switch market. For instance, Microsoft recently started sales of the 200/400 Gbps, and Google will also be delivering 800 Gbps soon. The advent of 800Gbps optics that offers an incredibly cheaper cost per bit compared to two standalone 400Gbps optics, is likely to increase adoption of 800Gbps implementation. Moreover, as 800Gbps offers a reduced cost at the system level, the capacity of switch chip will increase significantly from 12.8Tbps to 25.6Tbps, when the 100 G SerDes technology becomes available. Thus, this trend is likely to continue in the global data center switch market over the forecast period.

Global Data Center Switch Market Restraints:

High cost of operation of data centers to hamper the market growth

The operational cost of data centers is increasing due to rise in cost of energy all over the world. Power is the major factor that increases cost of data centers. According to the International Energy Agency, data centers use 1% of global electricity and they are likely to consume 1/5^th of the global energy supply by 2025. Powering the servers contributes majorly to the high consumption of energy, which further creates heat and requires to be cooled. Again cooling these servers also consumes large amount of energy. And thus, due to high consumption of energy, the operational cost of data centers increases, which in turn adversely impacts growth of the global data center switch market.

Availability of self-reliant enhanced servers to impede growth of the market

Virtualization in data centers is becoming popular among companies. It helps in eliminating hardware problems inside a data center and allows virtual machines to be moved easily. Virtualization enables consolidation of data for saving spaces, provisioning of resources and planning capacity, reducing time to provide new servers, optimum use of resources, and improvement in manageability. However, virtual switches are increasingly being used for handling connection between different servers. And this is expected to impede demand for switches over improved servers which deliver upstream core connectivity with optical cross-connects. Thus, this factor is expected to restrain growth of the global data center switch market over the forecast period.

Figure 2. Global Data Center Switch Market Share (%), By Switch Type, 2022

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Global Data Center Switch Market Segmentation:

The global data center switch market report is segmented into Switch Type and Region.

Based on Switch Type, the market is segmented into Core Switches, Distribution Switches, and Access Switches. Out of which, Core Switches is expected to dominate the global market over the forecast period and this is attributed to the increasing number of data centers, leading to rise in demand for core switches. These switches handle heavier workloads compared to access and distribution switches. Several companies are developing new data centers, which is creating demand for core switches.

Distribution segment is also expected to witness significant growth in the near future and this is owing to the increasing data traffic all over the world. The distribution switches are used for data traffic management. Many companies use these switches to avoid the data traffic. Thus, due to growing rate of data traffic is expected to support growth of the market over the forecast period.

Global Data Center Switch Market: Key Developments

In May 2022, Cisco Systems Inc. entered into partnership with PLDT for deploying 5G standalone service platform in Manila. This service will be deployed in the existing 5G TechnoLab of PLDT in Makati City.

In February 2020, Arista Networks Inc. completed acquisition of Big Switch Networks Inc., a network monitoring and software-defined networking company based in California.

In March 2019, Juniper Networks Inc. acquired Mist Systems, an AI-powered networking company for US$ 405 million, with the objective of using Mist’s technology for enhancing corporate sales with an Ai-driven end-to-end strategy.

In August 2021, Hewlett Packard Enterprise announced the acquisition of Zerto Ltd, for US$ 416 million. With this acquisition, the company expanded HPE GreenLake and it allowed to shift the storage segment to more cloud-based and software-defined data services solutions.

Global Data Center Switch Market: Key Companies Insights

The global data center switch market is highly competitive. This is attributed to continuous launch of new technologies due to ongoing R &D and efforts by value chain participants. Moreover, key players are adopting various business growth strategies in order to expand their presence on regional as well as global basis.

Some of the key players in the global data center switch market are Silicom Ltd Connectivity Solutions, Cisco Systems Inc., D-Link Corporation, Arista Networks Inc., Quanta Cloud Technology (Quanta Computer), Juniper Networks Inc., ZTE Corporation, Hewlett Packard Enterprise, Fortinet Inc., NEC Corporation, Mellanox Technologies (NVIDIA), Huawei Technologies Co. Ltd., Dell EMC, H3C Holdings Limited (Hewlett Packard Enterprise), Extreme Networks Inc., and Lenovo Group Limited.

*Definition: A data center switch is a device that has the capability to manage data centers. It is used to deliver a high-performance and scalable computing to a wide range of enterprise applications.