Server Connectivity Market Analysis – 1H24

DC Ethernet adapter revenue drops 6% QoQ with units down 4% in 4Q23

Significant announcements

• Intel’s programmable Ethernet adapter IPU E2100 has been launched to the open market. Previously, this was only available for Google, with whom Intel jointly developed it. This adapter supports up to two ports that can be configured as 1×200GE and 2×100GE.
• Broadcom announced its latest portfolio of 400GE PCIe Gen 5.0 Ethernet adapters targeting artificial intelligence (AI) clusters, codenamed Thor2. The Thor2 ASIC is built with 5nm process technology and supports RoCE (remote direct memory access [RDMA] over converged Ethernet) v3. Broadcom expects to start shipments in 2H24.
• Napatech announced an expansion of its IPU product line to include 400GE FPGA-based programmable Ethernet adapters. The new Ethernet adapters are based on Altera’s F2000X-PL architecture and include an Intel Xeon D CPU and an Altra Agilex7 I-Series FPGA.
• Microsoft is developing a programmable Ethernet adapter for its AI clusters using the team and IP it acquired through its acquisition of Fungible.

Key data points

• Ethernet adapter revenue fell to $3.6bn in 2023 from $4.1bn in 2022, and Omdia expects revenue to stay flat in 2024 at around $3.7bn.
• Ethernet adapter port shipments fell from the prior year in 2023 to 21.9 million and look to drop to 20.1 million in 2024. This follows the server market, which has fallen significantly from a year ago.
• Offload network interface card (NIC) revenue fell 13% YoY because of inventory digestion.
• In 2023, NVIDIA’s revenue market share was 41%, and Intel’s grew slightly to 17%.
• Unit market share remained similar among vendors as the revenue numbers were skewed by the higher-speed offload and programmable NICs, which cost significantly more than the lower-speed ones.