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In our latest forecast published in January 2021, the worldwide capex on data center infrastructure is projected to increase at a 7% compound annual growth rate (CAGR) from 2020 to 2025 to $278 billion.

We anticipate the growth of data center capex to vary depending on the customer segment. The Cloud will continue to gain share over enterprise/on-premise data center deployments, with COVID-19 accelerating Cloud adoption to some extent. Edge computing deployed over Telco networks could emerge near the tail end of the forecast period.

Among all the technology areas that we track, we forecast the cumulative revenue growth of servers to surpass that of other technology areas such as Ethernet switch, network security, optical transport, and router. Higher capex on servers will be driven by a combination of higher server unit demand from the Cloud and increasing server average selling prices (ASP). We identify some notable trends in server architecture that could have the effect of lifting server ASP for our forecast horizon.

Dell'Oro Group Data Center Infrastructure Revenue 2025

 

The followings are some additional highlights from the Data Center Capex 5-Year Forecast January 2021 Report:

  • CPU Refresh: New generation of servers are typically equipped with more memory, cores, storage, and faster I/O than the preceding generation. In 2018, server ASPs increased by 15%, partly due to the refresh of the Intel Xeon Scalable platform. We anticipate an uplift in ASP with Intel’s ramp of the Whitley server platform based on the 10 nm microarchitecture.
  • Accelerated Computing: As the deployment of accelerated servers continues to grow, we expect that data centers will be better optimized to process AI and ML workloads with more powerful, denser, and costlier accelerated servers equipped with AI accelerator chips such as GPUs and FPGAs. Some of the Tier 1 Cloud service providers have deployed accelerated servers using internally developed AI chips. We estimate that the attach rate of servers with AI accelerators will reach double-digits by 2025.
  • Smart NICs: These specialized network cards typically have an on-board programmable processor, and can be configured to offload the CPU of a specific network, storage, and security services and to provide flexibility for software-defined and converged networks. Smart NICs, which carry a 3 to 5X price premium compared to standard NICs, could further inflate server ASP if deployed at scale.

These advances to server architecture will correspondingly drive innovations in the data center, such as the need for more advanced cooling solutions, additional network capacity, etc. To learn more about Data Center Infrastructure and Server spending, or if you need to access the full report, please contact us at dgsales@delloro.com.

 

About the Report:Dell'Oro Group Data Center Infrastructure Revenue 2025

Dell’Oro Group’s Data Center Capex 5-Year Forecast Report details the data center infrastructure capital expenditures of each of the ten largest Cloud service providers, as well as the Rest-of-Cloud, Telco, and Enterprise customer segments. Allocation of the data center infrastructure capex for servers, storage systems, and other auxiliary data center equipment is provided. The report also discusses the market and technology trends that can shape the forecast.

About the Author

Baron Fung joined Dell’Oro Group in 2017 and is responsible for market research in Data Center IT Capex, Ethernet Adapter & Smart NIC, Data Center IT Semiconductor & Components, and Telecom Server. Mr. Fung has significantly expanded our coverage of data center infrastructure, focusing on cloud service provider capex, server technology, and vendor trends. His research and analysis have been widely cited in leading trade and business publications. Additionally, Mr. Fung has been invited as a speaker at investor conferences, industry events, and conferences.

Read articles Baron Fung has written or been featured in...

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400 Gbps and 800 Gbps adoption is expected to accelerate and drive nearly half of the revenue in the market by 2025

We just published the latest edition of our 5-year forecast for the data center switch market.  Six months ago, when we published our July 5-Year forecast, we predicted that the data center switch market will be for the most part resilient to the pandemic. We also explained that most of the downward adjustment relative to our January 2020 Pre-pandemic forecast was driven by the non-Cloud segments, which include enterprises as well as Telco Service Providers (SPs). In the meantime, our July 2020 forecast for the Cloud segment showed only a slight downward revision relative to our pre-pandemic January forecast.

We are now pleased to announce that we hold to our prior view that the pandemic won’t significantly depress the growth in the data center switch market (Chart). We even had to raise our forecast slightly compared to our prior July report, as certain segments of the market, namely Tier 2/3 Cloud SPs and large enterprises, have been performing better than expected.

Ethernet Data Center Switch market Dell'Oro Group

Our current forecast shows that the Ethernet switch data center market will decline only for one year (in 2020), at a low single-digit rate (-2%). We expect the market will return to growth in 2021 and will be able to exceed its 2019 pre-pandemic revenue level.

Other takeaways from the January 2021 5-Year Ethernet Switch Data Center Forecast Report include the following:
  • The 200/400 Gbps adoption has been so far driven mostly by Google (starting 4Q18) and Amazon (starting 4Q19). We expect the 200 Gbps adoption by Facebook to accelerate in early 2021, and the 400 Gbps adoption by Microsoft to accelerate in the second half of 2021.
  • We expect early 800 Gbps deployment to start in 2022, driven by the availability of 100 G SerDes. However, initial 800 Gbps deployments will not be based on native 800 G Ethernet MAC, but rather deployed as either 2×400 GE or 8×100 GE. In other words, 100 Gbps SerDes will allow building high-density, low-cost 400 Gbps or 100 Gbps systems. We expect early adoption to be propelled by Google and Amazon. We also expect Microsoft to adopt 800 Gbps (which will be deployed as 2×400 GE) by 2023.
  • 200 G SerDes may be available in the market by 2024. However, the availability of 200 G Lambda may lag 200 G SerDes. Given that connecting 200 G SerDes to 100 G Lambda requires Gearboxes which add complexity, cost, and power consumption, we expect 100 G SerDes with 100 G Lambda to dominate over the next five years.
  • Power is one of the major constraints for speeds beyond 400 Gbps. Future data center networks may require a combination of photonic innovation, such as co-packaged optics (CPO) and optimized network architectures.
  • Our current revenue forecast does not reflect an increased portion of optics sold by switch system vendors (For example, Cisco selling more optics with their switches). We plan to reflect that in separate tables to avoid inflating the market size.
  • We are assuming that CPO may start to ramp towards the end of our forecast period. However, the business model between chip suppliers and switch manufacturers is not yet clear to us (i.e who is going to carry the physical CPO inventory is not yet determined). Hence we elected to not reflect additional revenue associated with CPO in our current forecast until we have a better view of the business model.

If you need to access the full report to obtain revenue, units, pricing, relevant details including speeds, regions, market segments, etc., please contact us at dgsales@delloro.com.

 

Dell'Oro Group Ethernet Data Center Switch 5-Year Forecast ReportAbout the Report

The Dell’Oro Group Ethernet Switch – Data Center Five Year Forecast Report provides a comprehensive overview of market trends and includes tables covering manufacturers’ revenue, port shipments, and average selling price forecasts for various technologies: Modular and Fixed by Port Speed; Fixed Managed and Unmanaged by Port Speed. We forecast the following port speeds: 1000 Mbps; 10 Gbps; 25 Gbps; 40 Gbps; 50 Gbps; 100 Gbps; 200 Gbps; 400 Gbps, 800 Gbps. We also provide Regional Forecast as well as forecast by different market segments (Top 4 U.S. Cloud SPs, Top 3 Chinese Cloud SPs, Telco SPs, Rest of Cloud, Large Enterprises, Rest of Enterprises).
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Dell’Oro Group published a January 2021 Mobile Core Network market five-year forecast report

The Mobile Core Network (MCN) market’s cumulative manufacturing revenues are expected to approach $60 B from 2021 to 2025. The first 5G Standalone (5G SA) networks launched in 2020 resulting in manufacturing revenues for the 5G Core market for the first time, including network functions for packet core, policy and subscriber data management. Initial revenues were primarily in mainland China, and are expected to accelerate thru the forecast period as all regions around the world begin building their 5G SA networks. The 4G Core will still be the dominant core, but declining in the later years of the forecast as the growth of 5G Core offsets the decline. The IMS Core market will still continue to rise throughout the forecast period as the migration to 5G accelerates the need for VoLTE, and eventually VoNR.

Mobile Core Network Market

 

APAC and EMEA Regions to account for over 70% of the revenues

Regionally, APAC (Asia-Pacific) and EMEA (Europe, Middle East, and Africa) regions are expected to account for over 70% of the revenues during the forecast period. The cumulative revenues for the EMEA region will exceed the APAC region for the first time in a forecast period, due to the number of growing subscribers in EMEA. APAC dominates in the first half of the forecast period which is eventually taken over by EMEA in the second half of the forecast period.

Network Function Virtualization (NFV) continues to grow

The revenue mix of NFV is expected to grow significantly approaching 100% in 2025, reflecting the move to 5G Core functions. NFV functions are moving from cloud-ready to cloud-native network functions (CNFs). At the same time, networks are migrating toward containers on VM servers, especially for 5G Core—and eventually to bare metal servers—eliminating the virtualization layer, thereby reducing both cost and complexity.

Multi-Access Edge Computing (MEC) will enable new consumer and enterprise applications

MEC will improve latency in the network for both consumer and enterprise applications. Consumers will be served by Public MEC deployments, while enterprise applications will be served by Public MEC and Private MEC (on-premises) deployments. For a more in-depth look at MEC, see the Dell’Oro Group MEC Advanced Research Report.

 

About the ReportDell'Oro Group Mobile Core Network 5-Year Forecast Report

Dell’Oro Group’s Mobile Core Network 5-Year Forecast Report offers a complete overview of the market for Wireless Packet Core, IMS Core, policy, and subscriber management with historical data, where applicable, to the present. The report provides a comprehensive overview of market trends by network function implementation (Non-NFV and NFV), covering revenue, licenses, average selling price, and regional forecasts for various network functions. To get a copy of the report, please contact us dgsales@delloro.com.