The network hardware market is split between service provider ($124b spend in the year to June) and enterprise ($51b) types. The former is led by Huawei – a Chinese company behind the roll out of technology for telecoms companies to allow a massive growth in mobile devices over the last few years. The latter is dominated by Cisco – an American company responsible for the massive growth in the use of IP networks by businesses (enterprises) over a decade ago.
At a regional level (see my Figure above) network sales in Asia Pacific have driven growth in recent years, while those in EMEA have declined significantly; in comparison sales in the Americas have been more stable, but declining slightly in the most recent years.
To some extent this ‘constant dollar’ picture is coloured by significant changes in exchange rates of course. Converting the market spending by quarter into local currency (the Euro for EMEA and the Chinese Yuan Renminbi for Asia Pacific) in the Figure opposite shows that there was a peak in spending in EMEA in 2015 and by Asia Pacific in 2016-2017. As for the forecast (based on Q2 2018 exchange rates) EMEA is set for more growth than the other two regions to 2020.
My Figure shows market shares for the overall market and the two sub-markets. It demonstrates the fact that although Cisco is by far the most important supplier of network equipment to businesses, Huawei’s much bigger share of the service provider area gives it the lead overall. It has also beaten HPE in the enterprise market as the second largest enterprise network supplier, but is still far behind Cisco, which had a 55.1% share of sales in the last year.
Looking at network hardware by type (see Figure) LAN switches and routers are the leading areas of spending. Enterprise telephony sold by Nokia’s ex-Alcatel Lucent team and Mitel among others is the next largest, although in decline, as is SAN networking. Beyond 202 SAN spending will increase once more to accommodate the influx of NVMe over SAN solutions, which are coming into the market for the first time in 2018. Physical firewalls are the smallest of the network types being sold throughout the period shown.
Networking is a vital area of the ITC market as it enables digital interactions with servers to stretch out to any computing device, however it remains a specialist market in which owning Intellectual Property is vital for vendor success. I don’t expect this situation to change any time soon.