The worldwide Carrier Ethernet switching and routing market is forecast to fall 8.5% this year to $5 billion from $5.5 billion in 2008. IDC expects an overall compound annual growth rate (CAGR) of 5% for 2008-2013.
The market in Q2 is down 12% from the same period last year but up 12.7% quarter over quarter. Europe, the Middle East, and Africa (EMEA) was down significantly as a percentage of the total, while North America and Asia Pacific increased.
North America has been the largest consumer of Carrier Ethernet equipment to date, with 34.8% of the worldwide market. We expect that share to fall somewhat over the next five years as APAC and EMEA increase their consumption of Ethernet connectivity options.
The market continues to be driven by business services (storage, disaster recovery, E-Line, and E-LAN managed services) as well as residential services for IPTV or triple play and the beginning of the wireless backhaul market being built out. It is the healthiest portion of the service provider routing and switching market, with the least downside potential and slight growth expectations for 2010.
The router portion of the Carrier Ethernet market is expected to grow 1% to a $3.2 billion. The Layer 2+ switch portion of the market is expected to decline 21.2% in 2009 and will end the year at $1.8 billion. The decline in switching is due to shifts from major vendors, like Cisco where the Catalyst line is being used for an Ethernet aggregation function, which lessens the switching portion and expands the router portion of the market.
In addition, in China the growth continues to be in the router portion of the marketplace as most large telcos still require minimal intelligence in their networks.