Data Center Switch Market By Type, Technology, End-User, & Region for 2024-2031

Data Center Switch Market Valuation - 2024-2031

The increasing demand for data center switches is primarily driven by the exponential rise of data generated and consumed by both organizations and people. Data centers have emerged as the foundation of modern digital infrastructure, thanks to advances in digital transformation, cloud computing, big data analytics, and the Internet of Things (IoT). Organizations from a variety of industries including finance, healthcare, retail, and entertainment are increasingly relying on data centers to store, process, and manage massive volumes of data by enabling the market to surpass a revenue of USD 16.26 Billion valued in 2024 and reach a valuation of around USD 24.5 Billion by 2031.

The transition to more scalable and flexible networking solutions such as Software-Defined Networking (SDN) and Network Functions Virtualization (NFV) is driving up demand for data center switches. These technologies enable data centers to dynamically manage and optimize their network resources resulting in increased agility and cost-efficiency. As companies seek to cut operational costs and improve network performance, the popularity of SDN and NFV solutions is increasing creating a greater demand for data center switches that enable these advanced networking paradigms by enabling the market to grow at a CAGR of 5.80% from 2024 to 2031.

Data Center Switch Market: Definition/ Overview

A data center switch is a specialized piece of network gear that manages and directs data flow between servers, storage devices, and other networked equipment. In layman's terms, it works like a highly efficient traffic cop ensuring that data packets are sent to their intended destinations swiftly and without collisions. These switches are critical for sustaining a data center's performance, stability, and scalability as it houses a huge number of servers and other devices that must connect at all times.

Data center switches manage and direct network traffic within data centers making them critical components of modern IT infrastructures. Their major function is to enable fast communication between servers, storage systems, and other network devices. Data center switches connect various devices allowing for efficient data transfer and smooth information flow across the network. This is critical for ensuring the performance and reliability of applications and services housed in the data center.

The future of data center switches will be defined by advances in speed, efficiency, and intelligence. As data centers grow and handle more data traffic, there is a greater need for switches that can accommodate larger bandwidth and faster data processing speeds. The migration from regular Ethernet to higher-speed Ethernet protocols like 400G and 800G will be a big trend.

How will Rising Cloud Adoption Drive the Data Center Switch Market?

The data center switch industry is expanding rapidly owing in large part to the widespread adoption of cloud computing in many industries. As businesses increasingly move their operations and data to the cloud, the demand for reliable and efficient data center infrastructure, particularly switches, grows. According to Gartner, global public cloud end-user spending is expected to reach USD 597.3 Billion in 2023, up 21.7% from 2022. This significant increase in cloud spending directly correlates with rising investments in data center switches to serve the expanding cloud architecture. Furthermore, the International Data Corporation (IDC) expects that by 2025, 75% of businesses will have embraced a digital-first approach mandating cloud-based IT infrastructure and operations.

Rising cloud use is also increasing demand for more complex and adaptable data center switches to handle new technologies and applications. The rise of artificial intelligence (AI), machine learning (ML), and Internet of Things (IoT) applications is putting additional strain on data center networks necessitating switches with increased bandwidth capabilities and innovative functionality. According to the National Institute of Standards and Technology (NIST), the number of linked IoT devices will reach 41.6 billion by 2025 creating an incredible 79.4 zettabytes of data. To successfully handle and analyze this vast amount of data, more powerful and efficient data center switches will be required.

Will High Operational Cost Hamper the Data Center Switch Market?

The data center switch market is expanding rapidly due to the expanding use of cloud computing and the expansion of data centers throughout the world. According to International Data Corporation (IDC), global spending on public cloud services and infrastructure is expected to exceed USD 500 Billion by 2023 indicating a 22.3% compound annual growth rate (CAGR) between 2019 and 2023. This growth in cloud use demands a strong data center infrastructure including modern switches to handle the increased network traffic. Another key factor is the growing demand for high-performance computers and speedier data processing.

While high operational expenses may present hurdles for the data center switch market, they are unlikely to significantly impede growth. The growing emphasis on energy efficiency and the development of more cost-effective solutions are addressing this challenge. According to the US Department of Energy, data centers in the United States consumed approximately 70 billion kilowatt-hours of electricity in 2014, accounting for roughly 1.8% of total US electricity consumption. However, advancements in energy efficiency have resulted in a slower growth rate in data center energy consumption with an expected 4% increase from 2014 to 2020, despite large increases in data center workloads.

Category-Wise Acumens

Will Robust Security Measures Drive the Type Segment?

Core switches are prominent due to their critical role in handling high traffic levels and maintaining good network performance. Core switches are the backbone of data center networks linking servers and allowing for high-speed data transfers with low latency. Their capacity to serve large-scale, high-performance computing environments makes them essential for data centers that handle vast volumes of data and demand fast, dependable connectivity. Core switches are built for scalability allowing data centers to extend their infrastructure without sacrificing performance.

Core switches are designed for high throughput and low latency which is crucial for real-time applications like financial transactions, streaming services, and cloud computing. Their advanced features such as high port density, excellent bandwidth management, and strong security measures make them the ideal choice for data centers that want to provide continuous, high-quality service. Core switches also handle modern networking technologies like SDN and virtualization which improve network flexibility and efficiency. The ability to interact smoothly with these technologies reinforces core switches market dominance as they serve as the foundation for modern, active data center infrastructures.

Will the Widespread Adoption and Versatility Drive the Technology Segment?

Ethernet switching is the most widely used technology because of its versatility and low cost. Ethernet has been the foundation of data center networking for decades adapting to meet the changing needs of modern data centers. It serves as the foundation for connecting a wide range of devices including servers, storage systems, and networking equipment, and is therefore essential to the operation of most data centers. Ethernet technology's widespread use enables economies of scale resulting in lower hardware and maintenance costs. Furthermore, continuing advances in Ethernet standards such as the introduction of 10GbE, 40GbE, 100GbE, and now 400GbE ensure that Ethernet can satisfy data center's increasing capacity and performance demands.

Ethernet switching dominates the data center switch market because to its widespread adoption, cost-effectiveness, scalability, and versatility across multiple applications and industries. While Fiber Channel and InfiniBand are important for specific applications, they do not have the same level of broad applicability or market penetration as Ethernet. Ethernet technology's ongoing advances and ability to interact with modern network management systems solidify its position as the premier technology in data center switching.

Country/Region-wise Acumens

How Does Increasing Internet Usage Drive the Market in North America?

The North American region dominates the worldwide data center switch market owing mostly to increased internet consumption across the continent. This tendency is especially prominent in the United States and Canada where digital transformation projects and cloud service use continue to grow. The increasing expansion of internet usage in North America is a significant driver of the data center switch market. The International Telecommunication Union (ITU) predicts that internet penetration in North America will reach 90% by 2021, one of the highest rates in the world. According to the US Census Bureau, 91.8% of American households have broadband internet access in 2021. This ubiquitous connectivity is resulting in a significant rise in data traffic needing a more robust and efficient data center infrastructure.

Furthermore, the proliferation of bandwidth-intensive applications such as video streaming, online gaming, and virtual reality is testing the boundaries of existing network infrastructure. Netflix, for example, said that in 2020, its users watched an average of 3.2 hours of video each day up from 2 hours in 2019. This surge in high-bandwidth applications mandates the use of more complex data center switches to efficiently manage and route traffic.

Will the Expansion of Investments in the IT Industry Drive the Market in the European Region?

The European IT business is expanding rapidly, driven by increase in digitalization and the demand for secure data infrastructure. Eurostat, the EU's statistical body reports that the Information and Communication industry in the EU increased its value added by 5.2% in 2022 compared to the previous year. This expansion is evident in higher investments in data centers and related technology. According to the European Data Centre Association, the data center industry in Europe is predicted to reach USD 65.7 Billion by 2024, with a CAGR of 11.2% between 2019 and 2024. This expansion needs advanced networking solutions which increases demand for high-performance data center switches. Furthermore, the European Commission's Digital Decade strategy targets 75% of EU enterprises to use cloud computing services and big data.

The rise of edge computing is another aspect driving market expansion. By 2025, IDC expects that 75% of enterprise-generated data will be created and handled at the edge rather than in typical centralized data centers. This trend is driving the construction of numerous smaller data centers around Europe each requiring sophisticated switching technologies. Furthermore, the rapid use of 5G technology increases the demand for low-latency, high-bandwidth network infrastructure. The European 5G Observatory forecasts that by the end of 2023, 5G coverage will have reached 74% of the EU population up from 66% in 2022.

Competitive Landscape

The data center switch market is a dynamic and competitive space, characterized by a diverse range of players vying for market share. These players are on the run for solidifying their presence through the adoption of strategic plans such as collaborations, mergers, acquisitions, and political support. The organizations are focusing on innovating their product line to serve the vast population in diverse regions.

Some of the prominent players operating in the data center switch market include:

Arista Networks, Inc.

Cisco Systems, Inc.

Dell Technologies, Inc.

D-Link Corporation

Extreme Networks, Inc.

Hewlett Packard Enterprise Development LP

Huawei Technologies Co. Ltd.

Juniper Networks, Inc.

New H3C Technologies Co. Ltd. (Tsinghua Unisplendour)

Nvidia Corporation

Silicom Ltd. (Rad Group)

ZTE Corporation

Latest Developments

In October 2023, Cisco and Aviz Networks collaborated to offer an enterprise-grade SONIC solution for major customers looking to install an open-source network operating system. This agreement comprises delivering Cisco's 8000 series routers integrated with Aviz Networks' SONIC management software, as well as 24-hour technical assistance. This partnership's support focuses on addressing client concerns about open-source NOS maintenance assuring a trustworthy solution.

In September 2023, Hyperscalers chose Arista over Cisco for data center switches. Arista focuses on cloud service providers, which account for more than half of its sales. In recent years, the networking provider has also moved to "diversify its business" by expanding into the enterprise market.

Data Center Switch Market, By Category

• Type:
• Core Switches
• Distribution Switches
• Access Switches
• Technology:
• Ethernet Switching
• Fiber Channel Switching
• InfiniBand Switching
• End-User:
• Enterprises
• Telecommunication Providers
• Cloud Service Providers
• Region:
• North America
• Europe
• Asia-Pacific
• South America
• Middle East & Africa
• Analyst's Take
• In conclusion, the Emergency Data Center Switch Market is anticipated to witness robust growth over the forecast period, driven by the increasing adoption of data center solutions across various industries and the growing awareness among enterprises regarding the importance of disaster recovery and business continuity planning. Moreover, the rising incidence of natural disasters and cyber-attacks underscores the need for resilient data center infrastructure, further fueling demand for emergency data center switches. As organizations continue to prioritize data security and uninterrupted operations, investments in advanced switch technologies capable of ensuring uninterrupted data transfer and network resilience are expected to escalate, presenting lucrative opportunities for market players.