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What's going on with the decline in data center switch sales?
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Author : JIUZHOU
Update time : 2024-07-12 10:22:25
Backlog normalization, inventory digestion, and spend optimization among cloud service providers and enterprise customers are to blame.
In 2024, the market research firm predicts that spending on front-end networks will be low. However, spending on AI back-end networks is expected to be high.
Sales revenue for data center switches decreased in the first quarter of 2024, marking the first decline in over three years. This drop occurred despite the growing demand for AI networks.
According to a group vice president at market research firm:
Backlog normalization, inventory digestion and spending optimization among cloud service providers and enterprise customers are the culprits.
But it seems that some vendors have managed to avoid the decline.
Network reality
200G, 400G and 800G switches together account for about a quarter of total revenue. The rest comes from switches with speeds of 100G and below.
While the adoption of 400G and 800G switches is expected to accelerate this year and next. But the group vice president of market research firm explained. Part of the reason is the different speeds of switches used in data centers.
For front-end networks connecting general-purpose servers, speeds of 100G and below are most appropriate.
Part of the reason is that these networks
“are often about compute, not about the network, this means that compute is the bottleneck, not the network.” Network utilization is often 50% or less. That’s why bandwidth requirements are less.
100G switches can be used for core aggregation or leaf and spine scenarios. 25G and 10G switches are used for server access.
That said, some hyperscalers are starting to use 200G and 400G in their front-end networks.
Generally speaking, switch speeds above 400G are currently used mainly for back-end networks that accelerate servers.
In these back-end use cases, the bottleneck is the network, not the compute.
Therefore, faster speeds are needed to maximize the use of expensive GPUs.
Steve Schmidt, a vice president at a market research firm, recommends running the network at full capacity. This will prevent expensive accelerators like GPUs from sitting idle while waiting for network responses. Running the network at full capacity is the best approach to avoid wasting resources. Schmidt advises against underutilizing the network, which can result in unnecessary costs.
Looking ahead to the rest of 2024, the market research firm’s group vice president said:
The market research firm expects “spending to be soft in front-end networks, but huge spending in AI back-end networks.”
She concluded: “We will see how much share Ethernet can take in the back-end network.”
In 2024, the market research firm predicts that spending on front-end networks will be low. However, spending on AI back-end networks is expected to be high.
Sales revenue for data center switches decreased in the first quarter of 2024, marking the first decline in over three years. This drop occurred despite the growing demand for AI networks.
According to a group vice president at market research firm:
Backlog normalization, inventory digestion and spending optimization among cloud service providers and enterprise customers are the culprits.
But it seems that some vendors have managed to avoid the decline.
Network reality
200G, 400G and 800G switches together account for about a quarter of total revenue. The rest comes from switches with speeds of 100G and below.
While the adoption of 400G and 800G switches is expected to accelerate this year and next. But the group vice president of market research firm explained. Part of the reason is the different speeds of switches used in data centers.
For front-end networks connecting general-purpose servers, speeds of 100G and below are most appropriate.
Part of the reason is that these networks
“are often about compute, not about the network, this means that compute is the bottleneck, not the network.” Network utilization is often 50% or less. That’s why bandwidth requirements are less.
100G switches can be used for core aggregation or leaf and spine scenarios. 25G and 10G switches are used for server access.
That said, some hyperscalers are starting to use 200G and 400G in their front-end networks.
Generally speaking, switch speeds above 400G are currently used mainly for back-end networks that accelerate servers.
In these back-end use cases, the bottleneck is the network, not the compute.
Therefore, faster speeds are needed to maximize the use of expensive GPUs.
Steve Schmidt, a vice president at a market research firm, recommends running the network at full capacity. This will prevent expensive accelerators like GPUs from sitting idle while waiting for network responses. Running the network at full capacity is the best approach to avoid wasting resources. Schmidt advises against underutilizing the network, which can result in unnecessary costs.
Looking ahead to the rest of 2024, the market research firm’s group vice president said:
The market research firm expects “spending to be soft in front-end networks, but huge spending in AI back-end networks.”
She concluded: “We will see how much share Ethernet can take in the back-end network.”
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