Recently, Dell'Oro Group reported that the global data center Ethernet switch market is expected to grow at a compound annual growth rate of nearly double digits between 2021 and 2026, with cumulative spending approaching $100 billion over the next five years. Speeds of 400 Gbps and higher are expected to account for half of the spending, with 800 Gbps surpassing 400 Gbps by 2025.
Given strong bookings and unprecedented backlog levels, we expect market demand to remain strong in 2022, but sales performance will depend on the supply environment," said Sameh Boujelbene, senior director, Dell'Oro Group. Looking ahead to 2023, the industry is beginning to worry about the sustainability of market demand levels, and increased macroeconomic uncertainty is exacerbating these concerns, which, combined with a potential improvement in the supply situation, could break the panic buying behavior we are currently experiencing in the market."
He continued, "Despite slower revenue growth in 2023 compared to 2022, the data center switch market will remain largely resilient to these macroeconomic headwinds as the epidemic expands the importance of the network and accelerates digital transformation. In addition, our interviews with value-added resellers and systems integrators indicate that many vendors have implemented some sort of no-cancellation policy for their orders, which should provide confidence in a strong revenue outlook through at least the first half of next year.
"Another factor underpinning our optimism about the long-term health of the market is the portion of spending driven by cloud service providers. By 2026, cloud service providers are expected to account for 60 percent of data center switch spending and drive adoption of 400 Gbps, 800 Gbps and 1600 Gbps speeds," Boujelbene added.
Arguably, data center growth is one of the main reasons why switch sales continue to pull higher. Previously, Dell'Oro Group had released a quarterly report on the global data center switch-related market. According to the report, global data center switch sales grew 16 percent year-over-year in the first quarter of 2022, reaching the second-highest revenue ever in that market and just 2 percent below the previous quarter's record sales level. The headliners Arista, Xinhuasan, Juniper, StarNet and white box vendors played a major role in this growth.
And the data center switch market may not have peaked yet; after all, data center construction at home and abroad has not yet reached saturation, according to available research forecasts.
In April this year, the data center research team of China ICT Cloud University released the "Data Center White Paper (2022)" to explain the current situation and future forecast of the global data center market.
The white paper revealed that the global data center market size exceeds $67.9 billion in 2021, up 9.8% from 2020, with the total number of new servers worldwide remaining stable and the growth rate of the total data center size slowing down from before. Three regions, North America, Asia Pacific and Western Europe, account for more than 90% of the new server scale in 2021, with Asia Pacific having become an important growth pole globally.
And the domestic data center market revenue in 2021 is about 150 billion yuan, with a compound growth rate of 30.69% in the past three years, and the total scale of data center racks has reached 5.2 million racks. With the deepening of digital transformation in various regions and industries in China, China's data center market revenue will maintain a continuous growth trend.
From a global perspective, promoted by the accelerated development of the global digital economy, emerging markets such as India and South Africa have gradually strengthened their policy support and industrial investment in data centers, becoming an important growth pole to drive the growth of global data center demand.
The domestic "East Data and West Computing" project has also entered into a comprehensive construction period, and diverse computing power demand scenarios such as high-tech, digital transformation and terminal consumption are emerging, with the empowerment effect coming to the fore. China's data center industry is evolving from a dominant general-purpose data center to a new situation where multiple types of data centers are developing together, and the layout of domestic data centers may be further optimized.
For the performance of the data center market in the short term, the white paper predicts that the global data center market revenue will reach $74.6 billion in 2022, with the growth rate remaining stable overall. As innovations in technical facilities and IT technologies will continue to emerge, data center technology will also become richer in connotation, further empowering industry development.
