AI drives Ethernet switch buying, IDC reports

Generative AI and untethered connectivity are driving enterprise IT buyers to invest in key networking technologies, according to IDC, which recently shared its Ethernet switch and Wi-Fi market findings.

“The Ethernet switching market in 2023 was dominated by the impact of AI, with the overall market rising 20.1% in 2023 to reach $44.2 billion,” said Brandon Butler, research manager, enterprise networks, IDC.

The market research firm distinguishes between data center and non-data-center portions of the Ethernet switch market, and buying trends varied across the two segments.

“Revenues in the data center portion of the market rose 13.6% year over year in 2023 as enterprises and service providers build ever-faster Ethernet switch speeds to support rapidly maturing AI workloads,” Butler said. “To illustrate this point, revenues for 200/400 GbE switches rose 68.9% for the full year in 2023.”

Also in the data center portion of the market, 100GbE switches increased 6.4% for the full year but declined 3% in the final quarter. Manufacturers’ direct sales increased 16.2% in 2023 and “continue to be an important part of the datacenter segment,” IDC stated, making up 14.3% of the segment’s revenues for the full year.

The non-data-center segment of the Ethernet switch market – which includes lower-speed switches that are typically deployed in enterprise campus and branch locations – grew 25.2% in 2023, but declined 1.9% in the fourth quarter.

“The non-datacenter segment of the Ethernet switch market grew 25.2%, driven by improved component availability, enabling vendors to recognize revenues from fulfilling backlogged product orders, leading to high growth rates,” Butler said. New product orders slowed in the fourth quarter as customers focused on implementing products, according to IDC.

“In the non-datacenter portion, Ethernet switch vendors are embedding AI capabilities in software management platforms to improve operations. Connectivity in general, and Ethernet switching in particular, are playing an increasingly critical role in supporting the era of AI everywhere,” said Vijay Bhagavath, IDC research vice president, cloud and data center networks, in an IDC statement.

Wi-Fi 6E adoption on the rise

On the wireless front, IDC is also reporting a shift in 2023 buying trends as products became available and backlogged orders were fulfilled, leading to a decline in the fourth quarter.

“In 2023, the enterprise WLAN market grew 7.6% to reach $10.8 billion, but it was a tale of two halves: in the first half of 2023, enterprise WLAN revenues rose 43.3% compared to the first half of 2022, driven by vendors shipping backlogged products,” IDC’s Butler says. “In the second half of the year, market revenues declined 16.6% compared to the same period a year earlier when new product orders slowed.”

Wi-Fi 6E and Wi-Fi 7 both hold promise for enterprises: Wi-Fi 6E can enable high data transmission speeds, higher capacity, and low latency; and Wi-Fi 7 is said to be able to support new uses cases including high-capacity applications such as augmented or virtual reality as well as video streaming.

“Wi-Fi remains a critically important technology for organizations across the globe, and with the Wi-Fi 6E and Wi-Fi 7 standards enabling Wi-Fi to use the 6 GHz band, a range of enhanced use cases are being supported,” Butler said. “Wi-Fi 6E access points grew to make up just under a quarter (23%) of enterprise-dependent AP sales in the fourth quarter of 2023, indicating the continued rapid adoption of Wi-Fi 6E technology.”

The emergence of Wi-Fi 7 isn’t going to impede Wi-Fi 6E adoption, according to Butler, who said Wi-Fi 6E continues to grow across market segments.

“We’ve already seen vendors roll out Wi-Fi 7 infrastructure, but we expect market adoption of Wi-Fi 7 to ramp in late 2024 or early 2025 as client device support becomes more widespread,” Butler said. “In terms of Wi-Fi 7 impacting Wi-Fi 6E uptake, we don’t expect that to be a significant issue. Wi-Fi 6E continues to grow its share of revenues and unit shipments across both the enterprise and consumer segments and most enterprises have a standard upgrade cycle for new WLAN Infrastructure.”