A data center switch is a high-performance switch used primarily by large enterprises and cloud providers that rely heavily on virtualization. It can be deployed throughout the data center or with two or one additional layers of flat grid or fabric architecture.
According to a recent report released by market research firm Reportlinker, the global data center switches are worth $14.4 billion and will grow to $19.8 billion by 2027, with a compound annual growth rate (CAGR) of 5.4%.
The data center switch market is highly competitive with a mixed bag of participants. In terms of market share, the leading players in this field rarely dominate the market. These companies follow a range of strategies, including expansion, mergers and acquisitions, joint ventures, partnerships, etc., and have been able to strengthen their position in the business. Key market players in the global data center switch market include Cisco, Jupiter Networks, Dell EMC, Arista Networks, ZTE, Hewlett Packard Enterprise, Mellanox, Huawei, Extreme Networks, and others.
Key highlights of the report include:
- The increasing application of cloud computing technology, data localization and new technologies such as 5G and the Internet of Things has led to a surge in global data center investment.
- Due to the changing needs of organizations of all sizes, the endless development of millions of connected devices, and the rapidly growing daily volume of data generated via the Internet, data centers are rapidly becoming mainstream.
- Furthermore, to unlock the full potential of AI technology, more computational processing and decision-making operations are required. Depending on performance, capacity, and cost considerations, the location of AI processing and data in the future is likely to be primarily from the cloud to on-premises data centers to the network edge. Connected devices, smart industries, and connected cars are expected to create huge opportunities for edge computing, thereby becoming a driver of new data centers, influencing the research market.
- Demand for data centers has grown as the COVID-19 pandemic drives remote work. Rising data traffic has impacted the market as the use of cloud services expands. The increased data traffic on OTT platforms during the COVID-19 pandemic has led to the rapid expansion of this market.
- The COVID-19 outbreak has affected the supply chain of data center construction. On-site construction of data centres has been affected by the lockdown, which has delayed project completions and led to lower sales in hard-hit sectors such as hospitality and entertainment, affecting construction activity.
- Rapid adoption of cloud-based business operations is helping to drive enterprises to acquire data management capabilities to handle the large volumes of data that are being generated. With the development of multi-cloud computing, the transfer of traditional local physical servers to data centers based on virtual networks has promoted the development of global data centers, and the demand for data center switching equipment has continued to increase.
- However, electricity remains one of the biggest cost drivers in today's data centers. According to the International Energy Agency, 1% of the world's electricity is used by data centers, which will consume a fifth of the world's electricity supply by 2025. Most of the energy needs come from powering the servers, which in turn generate heat and require cooling. This cooling again consumes a lot of energy.
According to Reportlinker, the key market trends of global data center switches are as follows:
Core switches have the largest market share. The core switch needs to have a higher priority than the other two switches. Because core layer switches handle much larger workloads than access and distribution switches. Currently, companies with larger market shares, such as Amazon and Microsoft, are developing new data centers. Due to the growth of data centers, the demand for core switches will grow significantly.
Increasing traffic management is creating new growth opportunities for core switches. For example, in 2020, in order to handle high traffic while maintaining the quality of the streaming service, Netflix decided to remove the highest bandwidth streams and reduce traffic by 25%.
Growing traffic must be handled efficiently and reliably with low and predictable latency. But since vPC (virtual-port-channel) can only provide two active parallel uplinks, bandwidth becomes a limiting factor in a three-tier data center architecture. Another problem with a three-tier design is that server-to-server latency varies depending on the communication path used. Cisco, for example, introduced a new data center design called the Clos network-based spine-and-leaf architecture to address these limitations. This design has been shown to provide high-bandwidth, low-latency, non-blocking server-to-server connections.
North America is increasingly adopting cloud computing technology. For example, in February 2022, Meta Platforms, Inc. (Facebook Inc.) announced its intention to expand its data center market by investing $800 million in a hyperscale campus in Idaho, USA. By expanding data center capabilities, IT infrastructure will gain improve. The need for data center networking components such as switches and routers will be a key component of hyperscale infrastructure. The data center switch market will see growth as hyperscale IT infrastructure providers adopt high-performance core switches for fast data transfer.
According to real estate expert CBRE, data center leasing in the top seven U.S. markets in 2021 is 31% higher than in 2019 and 50% higher than in 2020, with data center leasing slightly down due to the pandemic . Northern Virginia is the largest market, accounting for more than 60 percent of the nation's total new data center area.
Much of the demand for colocation data centers comes from cloud providers and social media companies. However, the adoption of new technologies such as self-driving car technology, 5G infrastructure, virtual reality community, blockchain technology is also driving the market.
Atlanta has become another key market for data center development in recent years, with vendors launching new programs targeting the enterprise market. In April 2021, QTS Data Center submitted plans to build a 1.1 million-square-foot data center in Atlanta. Under the plan, QTS will develop 2.3 million square feet of mixed-use development on approximately 36 acres of land, including data center space, office, retail and residential land. These developments are driving the demand for data center switching products in these regions.
Enterprises in North America have begun to view hyperconvergence as a more viable alternative to traditional data centers because it combines storage, compute and networking into a single system, reducing data center complexity and increasing scalability sex. The popularity of hyperconverged infrastructure platforms is driving the data center market.
In February 2022, Corscale, a new data center development platform created by Patrally Group and its capital partner USAA Real Estate, entered the Northern Virginia market. The company's first project is Gainesville Crossing, a 300-megawatt development in Prince William County that will have five data centers optimized for hyperscale customers.
The region has also witnessed high penetration and intensive launches of 200GbE and 400GbE switch ports in recent years. In March 2021, for example, Hewlett Packard Enterprise (HPE) introduced the 32-port 200GbE SN3700M switch, which is purpose-built for modern data centers. The switch uses a Spectrum-2 ASIC based on 50G PAM-4, has a bidirectional switching capacity of up to 12.8Tb/s, and a breakthrough packet processing rate of 8.33Bpps.
