Router/switch market propelled to $76B by 400G adoption

Adoption of 400 Gbit/s routing technologies is forecast to propel growth in the service provider routing and switching market over the next five years, according to a new forecast from Dell'Oro Group.

Cloud and telco service providers to benefit from 400G adoption

Global service provider (SP) router and switch market revenues are expected to reach $76 billion by 2026, a 2% compound annual growth rate (CAGR), said Dell'Oro. Both telcos and cloud service providers are predicted to benefit, in the form of network expansion and increased revenue, from adoption of 400G routing technologies.

Adoption of 400G in the wide area network (WAN) and data center interconnect (DCI) will play a significant role in driving growth in the routing/switching market, said Dell'Oro.

Analysts expect that the cloud SP segment will grow faster than the telco SP segment over the next five years.

Ivaylo Peev, senior analyst at Dell'Oro Group, said even with macroeconomic and geopolitical pressures, the firm's July forecast for the router and switch market remains in-line with the January forecast.

"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," Peev said in a statement. "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."

Analysts also expect a gradual increase in the number of 400ZR modules used with 400GE port shipments over the next five years, and ZR optical modules will also lead to new SP use cases. ZR optical modules support data transport over long-distances of up to 120 km and are based on 400ZR specifications as defined by the Optical Internetworking Forum (OIF).

According to a recent Heavy Reading report, by 2025, the majority of respondents in a global operator survey "expect greater than 25% penetration of 400ZR/400G ZR+ in each of the major transport segments and with fairly even distribution across them." These segments include DCI, metro aggregation, metro core and long-haul core.

In addition, 400ZR and 400G ZR+ are expected to be deployed most in metro aggregation, metro core and long-haul applications.

Looking ahead to 800G

A growing number of SPs already have their sights on deploying 800G-capable systems in their networks, according to the recent Heavy Reading report.

"The next two years look promising for coherent 800G adoption, as an additional 41% of CSPs (communication service providers) surveyed expect to deploy during that timeframe. Still, one-third of CSPs (33%) anticipate coherent 800G adoption in 2024 or later," explained Heavy Reading Principal Analyst Sterling Perrin in a recent blog post.

Figure 1: Between now and 2025, what portion of your metro/LH/subsea network wavelengths do you anticipate will be deployed with embedded 800G coherent optics? n=81
(Source: Heavy Reading, 2021)

Early on, 800G adoption by SPs will skew heavily toward the US market, he added.

Perrin explains that one of the benefits of 800G is that it "can address not just metro but also long-haul and even subsea segments – while running at sub-600G data rates." However, most of the current use cases are focused on long haul/subsea applications to reach a maximum data rate over a longer distance.

— Kelsey Kusterer Ziser, Senior Editor, Light Reading