Ethernet adapter market for high-speed data centers crests $1B: Analyst

May 20, 2020
Omdia found that the total Ethernet adapter market size stood at $1.7 billion for the year.

The market for Ethernet adapters with speeds of 25 Gigabits (25GE) and faster deployed by enterprises, cloud service providers and telecommunication network providers with data centers topped $1 billion for the first time in 2019, according to industry researcher Omdia (London).

The analyst found that the total Ethernet adapter market size stood at $1.7 billion for the year. This result was in line with Omdia’s long term server and storage connectivity forecast.

Factors driving that forecast include the growth in data sets, such as those computed by analytics algorithms looking for patterns, and the adoption of new software technologies like AI and ML, which must examine large data sets to be effective, driving larger movement of data.

“Server virtualization and containerization reached new highs in 2019 and drove up server utilization. This increased server connectivity bandwidth requirements, and the need for higher speed Ethernet adapters,” explained Vlad Galabov, principal analyst for data center IT, at Omdia. He added, “The popularization of data-intensive workloads, like analytics and AI, were also strong drivers for higher speed adapters in 2019.”

Price-per-port declining

According to the new research, 25GE Ethernet adapters represented more than 25 percent of total data center Ethernet adapter ports and revenue in 2019, as reported by Omdia’s Ethernet Network Adapter Equipment Market Tracker.

Omdia also found that the price per each 25GE port continued to decline. The new report states that a single 25GE port cost an average of $81 in 2019, a decrease of $9 from 2018.

Notably, despite representing a small portion of the market, the research also shows that 100GE Ethernet adapters are increasingly deployed by cloud service providers and enterprises running high-performance computing clusters, with shipments and revenue for 100GE Ethernet adapter ports both growing by more than 60 percent in 2019.

Each 100GE adapter port is also becoming more affordable, adds Omdia. In 2019, an individual 100GE Ethernet adapter port reportedly cost $321 on average, a decrease of $34 from 2018.

“Cloud service providers (CSPs) are leading the transition to faster networks as they run multi-tenant servers with a large number of virtual machines and/or containers per server. This is driving high traffic and bandwidth needs,” Galabov said.

He continued, “Omdia expects telcos to invest more in higher speeds going forward—including 100GE—driven by network function virtualization (NFV) and increased bandwidth requirements from HD video, social media, AR/VR and expanded IoT use cases.”

The Ethernet outlook

Omdia expects Ethernet adapter revenue to grow 21 percent on average each year through 2024. Despite the COVID-19 lockdown, the Ethernet adapter market is set to remain close to this growth curve in 2020, state the analyst.

Omdia notes that Ethernet adapters that can provide complete on-card processing of network, storage or memory protocols, data-plane offload or that can offload server memory access will account for half of the total market revenue in 2020, or $1.1 billion.

Meanwhile, the analyst says that Ethernet adapters that have an onboard field-customizable processor such as a field-programmable gate array (FPGA) or system on chip (SoC), will account for slightly more than than a quarter of 2020 adapter revenue, totaling $557 million, whereas adapters that only provide Ethernet connectivity will make up a minority share of the market, at just $475 million.

Intel maintains lead

Looking at vendor market share, Omdia finds that Intel held 24 percent of the 2019 Ethernet adapter market, shipping adapters worth $424 million in 2019.

This represents a 2.5-point decrease from 2018 that Omdia attributes to the aging Intel Ethernet adapter portfolio which consists primarily of 1GE and 10GE adapters with Ethernet connectivity only. The analyst notes that Intel indicated it will introduce adapters with offload functionality in 2020 that will help it remain competitive in the market.

Elsewhere, Mellanox captured 21 percent of the 2019 Ethernet adapter market, a 1-point increase compared to 2018. The vendor reported strong growth of its 25GE and 100GE offload adapters driven by strong cloud service provider demand and growing demand among enterprises for 25GE networking.

Broadcom was the third largest Ethernet adapter vendor in 2019, commanding a 14 percent share of the market, an increase of 3 points from 2018. Omdia says that Broadcom’s revenue growth was driven by strong demand for high-speed offload and programmable adapters at hyperscale CSPs.

Finally, the researcher notes that in 2019, Microsoft and Amazon continued to adopt in-house-developed Ethernet adapters. Given their large scale and the high value of their high-speed offload and programmable adapters, these companies cumulatively deployed Ethernet adapters worth over $300 million.

This figure made them the fourth and fifth largest makers of Ethernet adapters in 2019. As both service providers deploy 100GE adapters in larger numbers in 2020, both companies are set to remain key trendsetters in the market, says Omdia.

Omdia is a global technology markets researcher, established following the recent merger of the research division of Informa Tech (Ovum, Heavy Reading and Tractica) and the acquired IHS Markit technology research portfolio. Learn more at www.omdia.com.

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