Dell’Oro: 400 Gbps to drive SP router growth

Global cumulative Service Provider (SP) Router and Switch market revenues are projected to approach $76 billion by 2026, representing a 2 percent CAGR for the forecast period, according to a new report from Dell’Oro Group. The adoption of 400 Gbps routing technologies is expected to continue driving the overall market growth, allowing both Telecom and Cloud Service Providers to expand their networks and increase revenues.

“The July 2022 forecast remains in line with the January 2022 forecast, despite both emerging economic uncertainty and persistent market challenges,” said Ivaylo Peev, Senior Analyst at Dell’Oro Group. “Emerging economic uncertainty, racing inflation, China’s zero-COVID-19 policy, and the war in Ukraine are depressing markets in 2022, putting pressure on vendors and customers alike. We adjusted our projections to account for these market challenges, but we have not changed the baseline guidance of the forecast, because we believe that the underlying fundamentals of the SP Router market will remain healthy over the forecast period,” added Peev.

Additional highlights from the Service Provider Router and Switch July 2022 5-Year Forecast Report:

• The Cloud SP Segment is projected to grow faster than the Telco SP segment over the forecast period. 400 Gbps technology adoption in wide area networks (WAN) and Data Center Interconnect (DCI) applications should continue to drive the growth in this segment.
• ZR Optical Modules—long-distance optical modules that support distances of up to 120 km and are based on 400ZR specifications—will create new use cases for SP Core Routers. We project a gradual increase in the number of 400ZR modules used with 400GE port shipments over the forecast period.
• China has recently embarked on an infrastructure spending spree to address the economic slowdown caused by the country’s recurring COVID-19 related lockdowns. It is not yet clear how much China plans to spend on the new infrastructure plan. However, according to official Chinese government statistics, investment in infrastructure generally jumped by over 8 percent in 1Q 2022. Further, the Chinese policymakers who are directing the infrastructure overhaul appear to be emphasizing technology: specifically, new facilities for supercomputing, cloud computing, and artificial intelligence. If this level and focus of government stimulus are sustained for the next four quarters, Chinese SPs are likely to accelerate and expand their spending on network investments.