Despite on-going sanctions and lobbying by the US against Huawei, ZTE and other Chinese suppliers on the grounds that their ties with the Chinese government and governance could/might/have exposed users of their networks to data leakage espionage, the market remains strong. In the year to the end of June 2021 the world spent $213 billion on network hardware, split 72:28% between those sold to service providers and enterprises respectively.
Although it declined 1% in the second quarter v 2020, spending grew by 6% for the year.
The ‘two cities’ of my title refer to suppliers (Huawei v Cisco) and regions (Asia Pacific v America and EMEA); the two increasingly dominant suppliers and types of network sold. In particular:
Huawei’s dramatic and consistent market share growth has coincided with – and in most cases been the result of – a significant increase in investment in service provider networks in Asia Pacific. The decline in its market share in 2021 year-to-date is due in part to the success of the US in persuading other countries (the UK, Australia, Sweden and others) to exclude Huawei and ZTE equipment from their networks. In the absence of a significant US supplier, these government actions have bolstered the revenues of Nokia and Ericsson, but have delayed the roll out of 5G networks and reduced – what otherwise would have been – spending in the Americas and EMEA.
Cisco has maintained a market share of 50% of enterprise network market for as long as I can remember (see my Figure opposite). Enterprise networks are particularly popular in the Americas (especially in the USA) where customer spending has remained disproportionately higher than in EMEA and Asia Pacific since 2003 ad before. Cisco was the originator of IP networks and makes money not only from the sale of its hardware, but also from the many patents it holds from other suppliers. Indeed alleged patent infringements have formed part of the US government’s actions against Huawei and othe Chinese suppliers for many years.
The mix of products making up enterprise network market are split into a umber of categories (see my Figure above for annual spending on each since 2003). LAN switches, ,routers, wireless LAN and enterprise telephony are the major contributors. Despite a resurgence in the interest in Storage Area Networks (SANs) since the introduction of NVMe storage devices, spending on this element hasn’t grown substantially (yet).
Cisco’s lead is so great in the enterprise network market that I continue to need a logarithmic scale to show its comparison with other players (see my Figure above). The fastest growing of these over the last years has been Mellanox (now part of Nvidia) and Huawei, which is now in a strong number two position in this part of the market.
Huawei’s growing dominance of the service provider network market is shown in my Figure above. Ericssson and Nokia have held there positions as second and third players over years and have picked up 5G antenna business from the barring of Huawei from a number of Western countries; however they have still been loosing market share to Huawei despite this.
The extreme maturity of a number of IT markets has led to increasing dominance by two suppliers – Lenovo and HP in PCs, Canon and HP in peripherals, Dell and HPE in servers, Apple and Samsung in smartphones, etc. Huawei and Cisco’s position in the network hardware market is similar, although here increased nationalism and government intervention have made issues of trust central to future developments.
Information Technology and Communications research
