As data-center switch vendors reduce their reliance of proprietary/custom silicon, merchant silicon use is expanding beyond white-box vendors to traditional vendor portfolios.
- Intel in June announced an agreement to acquire Barefoot Networks, an Ethernet switching, programmable-silicon vendor. The transaction is expected to close in the third quarter of 2019 and will combine Intel’s ubiquitous central processing unit (CPU) silicon business with Barefoot’s programmable data-plane switching silicon. Intel says Barefoot’s application-specific integrated circuits (ASICs) will enable it to provide a comprehensive data center networking portfolio for enterprise, telco, and cloud provider markets.
- NVIDIA in March officially entered the data-center storage and networking realms by agreeing to acquire Mellanox, an Ethernet and InfiniBand networking switch and storage equipment vendor, for approximately $6.9 billion The transaction is expected to close by the end of calendar year 2019 and will combine NVIDIA’s graphics processing business with Mellanox’s switching and storage products.
- In September 2018, shortly after acquiring Mojo, Arista made a second acquisition when it purchased Metamako, which provides Xilinx field-programmable gate array (FPGA)-based networking products. Metamako’s products are known for providing low-latency hardware and software solutions designed for the financial services industry where high-frequency trading is constant. Arista in March began capitalizing on the technology and talent acquired from Metamako when it announced its first FPGA and Metamako Operating System (MOS) integrated products, Arista’s 7130L Series.
The axiom that software is eating the world may still be true, but it’s also true that hardware isn’t going out without a fight because of its capability to evolve over time and remain relevant.
As data-center switch vendors reduce their reliance of proprietary/custom silicon, merchant silicon use is expanding beyond white-box vendors to traditional vendor portfolios. In the Data Center Network Equipment Market Tracker - Q1 2019, we forecast merchant silicon shipped in data center Ethernet switches will reach 62 percent of all silicon units in 2023, up from 56 percent in 2018. During the same period, proprietary/custom silicon will drop to about 25 percent, down from 38 percent in 2018. Meanwhile, programmable silicon will rise to 13 percent, up from 6 percent in 2018.
Between 2018 and 2023, we expect growth in data center Ethernet switch data-plane forwarding silicon units to be driven by programmable silicon, rising at a 20 percent five-year compound annual growth rate (CAGR). The merchant silicon area will rise at a 5 percent five-year CAGR. In contrast, proprietary units will decline at a 6 percent five-year CAGR, as presented in the chart below.
DC Ethernet switch silicon shipments by silicon type
“It’s true that software is still eating the world, but hardware has been revived and has even found new life thanks to technology improvements in silicon and new open designs from organizations like the Open Compute Project Foundation,” said Devan Adams, principal analyst at IHS Markit.
Hardware giants like Intel and NVIDIA are recognizing the trends in the data center market and have acted quickly to capitalize on them by acquiring talent, intellectual property and technology from some of the innovative companies in the data center market. Given the deep pockets of these large businesses, their transactions may be characterized as low risk. However, if they continue to invest in their new toys and commit to expanding on the positive trajectory some of the companies were on before their acquisitions, these tech behemoths could come to pose a real threat to Broadcom’s stronghold in the data center switch market.
IHS Markit Data Center Network Equipment Intelligence Service
The IHS Markit Data Center Network Equipment Market Tracker provides quarterly worldwide and regional market size, vendor market share and forecasts through 2023. It also analyzes trends for data center Ethernet switches by category, speed, market segments and data-plane forwarding silicon. The tracker also covers application delivery controllers by category and software-defined WAN (SD-WAN) appliances and control and management software. Vendors tracked include A10, ALE, Arista, Array Networks, Aryaka, Barracuda, Cisco, Citrix, CloudGenix, CradlePoint, Dell, F5, FatPipe, HPE, Huawei, Hughes, InfoVista, Juniper, KEMP, Nokia (Nuage), Radware, Riverbed, Silver Peak, Talari, TELoIP, VMware and ZTE.