For the first time, high-speed Ethernet adapters with speeds of 25 gigabits and above topped the $1 billion threshold in 2019, and will continue to grow this year in the face of COVID-19 restrictions. According to research by Omdia, data center deployments last year by enterprises, cloud service providers and telecommunication network providers at data centers drove the total Ethernet adapter market to $1.7 billion.
The record year, which Omdia said was in line with its long-term server and storage forecast, was driven by growth in data sets—such as those computed by analytics algorithms that were looking for patterns—and the adoption of new software technologies such as artificial intelligence (AI), and machine learning, which rely on large data sets to be effective.
“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,” said Omdia's Vlad Galabov, principal analyst for data center IT, in a statement. “The popularization of data-intensive workloads, like analytics and AI, were also strong drivers for higher speed adapters in 2019”
Omdia said that 25GE Ethernet adapters represented more than 25% of total data-center Ethernet adapter ports and revenue in 2019, according to its Ethernet Network Adapter Equipment Market Tracker. Omdia also found that the price per each 25GE port continued to decline. A single 25GE port cost an average of $81 in 2019, a decrease of $9 from the prior year.
Despite representing a small portion of the market, 100GE Ethernet adapters were increasingly deployed by cloud service providers and enterprises running high-performance computing clusters. Shipments and revenue for 100GE Ethernet adapter ports both grew by more than 60% in 2019. The price is also dropping for 100GE adapters ports. In 2019, an individual 100GE Ethernet adapter port 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. “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.”
While the report didn't mention 400G, it appears as though that gear is starting to hit the market ahead of broad deployments next year. With the rollout of 5G and the work being done to increase network capacity due to COVID-19, 400G deployments have largely been put on the back burner this year, with the exception of cloud service providers.
While parts of the telecommunications industry are looking for a re-set this year due to the coronavirus pandemic, Omdia remains bullish on the Ethernet adapter market going forward. Omdia predicts the Ethernet adapter market will grow by 21% on average each year through 2024.
Omdia said 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.
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 a quarter of 2020 adapter revenue, totaling $557 million. Adapters that only provide Ethernet connectivity will make up a minority share of the market, coming in at just $475 million.
Intel leader of the pack
When sizing up vendor market share, Omdia said Intel accounted for 24% of the 2019 Ethernet adapter market, shipping adapters worth $424 million, which represented a 2.5-point decrease from 2018. Omdia attributed the decline to the aging Intel Ethernet adapter portfolio that mainly consisted of 1GE and 10GE adapters with Ethernet connectivity only. Intel has said it will introduce adapters with offload functionality in this year that will help it remain competitive in the market.
Mellanox pulled in 21% of the 2019 Ethernet adapter market for a one-point increase compared to 2018. Mellanox has 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% share of the market, an increase of three points from 2018. Broadcom’s revenue growth was driven by strong demand for high-speed offload and programmable adapters at hyperscale CSPs.
Last year, cloud titans Microsoft and Amazon continued to rely on in-house-developed Ethernet adapters. Given their large scale and the high value of their high-speed offload and programmable adapters, the companies cumulatively deployed Ethernet adapters worth over $300 million, according to Omdia. This made Microsoft and Amazon, respectively, the fourth and fifth largest makers of Ethernet adapters in 2019. As both service providers deploy 100GE adapters in larger numbers in 2020, Omdia expects them to continue to be key trendsetters in the market going forward.