Service Provider and Enterprise Networks have been extremely important during the pandemic; nevertheless most Telcos and organizations have been relying on those already installed to keep people, governments and businesses connected. In total the market grew by 1% to $187 billion in the year to the end of March, but shrunk by 4% to $45.2 billion in Q1 due to the suspension of activity during the lockdown in most affected countries.
In the first quarter the enterprise market declined by 6% to $12.6B and the service provider on by 3% to $32.6b (see the Figure above for my forecast for both areas by year).
Looking at the development of the market by product type (see my Figure above) we can see how the pandemic is changing what we buy. In particular LAN Switches and routers (both typically used to connect offices and those working within them) will decline in 2020, while Wireless LAN and Enterprise Telephony (typically used to connect remote employees and their homes) will certainly increase. These trends have been accelerated by the massive increase in those working from home, which will no doubt continue for the foreseeable future.
Nothing has changed in terms of market leadership, with Huawei in front in the total market and Service Provider area and Cisco’s increasingly dominant position in the Enterprise area (see my Figure above for market shares in the year to the end of March.
However networks continue to be subject to significant political pressures. The suspicion that Huawei might act as a spy for the Chinese government has led to sanctions and enforced bans on buying the company’s 5G service provider equipment in many countries, of which the UK was the latest. These embargos are driven by new nationalism, which itself has been amplified during the pandemic. There is no proof of of any such activity by Huawei, while international (non-US) governments and users should be equally suspicious of using American vendors offerings; in particular of subpoenas under the Patriot Act and State Legislation, which have been executed for information held in non-US cloud data centers.
At a regional level the strong growth of network sales in Asia Pacific continues (see my Figure above for its comparison with the Americas and EMEA). Despite the brief stall in sales everywhere in Q1 2020, I expect this trend to continue for the next couple of years.
The network market has grown to such an extent in the last few years that there were few reported disruptions despite the massive growth in usage during the lockdown, both by separated families and friends and those working from home. We saw a couple of gaming networks that limited download speeds to free up more important traffic. The market was mature enough to see a decline in sales in Q1 – the changes were more in the types of product sold. As in many other areas the pandemic is accelerating many of the trends that were already in place.