The global server and switching equipment market is expected to reach the value of USD 107.4 Billion by 2023, with a growing demand increase from end uses at 7.6% CAGR over the forecast period. The market value is forecasted to grow from USD 114.4 Billion in 2024 to USD 237.5 Billion in 2034.
The installation of 5G networks is very likely to fuel the growth throughout the forecast period. Increased use of edge computing and cloud computing will also contribute. Industrial automation trends, too, are likely to drive further growth. Notable trends also include the development of cloud data centers.
The use of high-performance Ethernet switches will enhance market dynamics. Apart from this, wireless backhaul solutions will also play a key role in growth. Intent-based networking (IBN) will also influence market advancements significantly. Incorporating artificial intelligence (AI) and machine learning into switching equipment will also impact the market.
| Attributes | Key Insights |
|---|---|
| Server and Switching Equipment Market Size in 2023 | USD 107.4 Billion |
| Estimated Server and Switching Equipment Market Value (2024) | USD 114.4 Billion |
| Projected Server and Switching Equipment Market Revenue (2034) | USD 237.5 Billion |
| Value-based Server and Switching Equipment Market CAGR (2024 to 2034) | 7.6% |
Switching equipment is used in a plethora of enterprise and industrial applications. First up, telecommunications providers also use this equipment to offer a wide range of services. These include telecommunications, information, and media services. Content distribution and entertainment are also part of their offerings.
Servers and storage providers also rely on these equipment for network infrastructure. They serves as a versatile and resilient platform. Businesses of all sizes, small, medium, and large, utilize these equipment.
Smartphone usage is driving growth in the server industry. The increasing number of data centres contributes to this growth. More data centers are being built around the world. Cloud service providers are upgrading their server capacity. IT and telecom industries are also expanding their capabilities. Circumstances like these are set to drive significant demand for these equipment.
Healthcare, banking, and financial services are also increasing server capacity. These upgrades aim to accommodate the increasing volume of data. IT infrastructure improvements are critical for enhanced security. All these factors have led to the development of this market.
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The table presents the expected CAGR for the global Server and Switching Equipment market over several semi-annual periods spanning from 2024 to 2034. In the first half (H1) from 2023 to 2033, the business is predicted to surge at a CAGR of 6.9%, followed by a slightly higher growth rate of 7.7% in the second half (H2).
| Particular | Value CAGR |
|---|---|
| H1 | 6.9% (2023 to 2033) |
| H2 | 7.7% (2023 to 2033) |
| H1 | 7.3% (2024 to 2034) |
| H2 | 7.9% (2024 to 2034) |
Moving into the subsequent period, from H1 2024 to H2 2034, the CAGR is projected to increase slightly to 7.3% in the first half and remain relatively moderate at 7.9% in the second half.
Increased Global Demand for Data Centers to Generate Significant Clamor for these Equipment
Emerging technologies like IoT, AI, and 5G boost data centers' importance. The global data center industry is growing rapidly. In 2023, the market was worth USD 114.3 billion. It's expected to reach USD 237.5 billion by 2034.
Cloud migration is driving data center construction worldwide. Major operators, like Google Cloud. Amazon Web Services, are expanding their presence globally. In 2021, USA users alone consumed 500 megawatts of data space. Such requirements, especially in the developed parts of the world, are generating an excellent demand for server and switching equipment.
Google Cloud planned new data centers in several US states. These include Nebraska, South Carolina, Virginia, Nevada, and Texas. Microsoft, also, announced plans to build many new data centers. They aim for 50 to 100 new centers across the USA. These investments will increase demand for data center switches as these switches are crucial for their operations.
Elevated Operational Costs of Network Switches to Affect the Market Negatively
Network switches are incredibly useful for network operations. They can transmit massive volumes of data in milliseconds without ever slowing down. This makes them ideal for applications that require high bandwidth and low latency, such as gaming, video editing, and cryptocurrency mining.
The research and development costs for network switches are somewhat high. The cost of a switch increases with additional functionality such as CPUs, memory, cabling, and ports.
The most recent hardware developed by larger businesses such as Intel and Broadcom typically costs D100 for tiny 5-port devices and can quickly reach thousands of dollars for a 24-48 port switch. However, as technology improves in efficiency, the cost of the changeover decreases.
The replacement cost is also higher since after every cycle these switches have to be replaced with new ones. This increases the cost of operation. Large-scale firms that extract larger data install switches with high durability, but the cost of procurement is quite high. These reasons have collectively affected the market negatively.
Growing Data Volumes in Organizations Helps the Market Grow
IT infrastructure has changed due to new technology developments. Edge computing, AI, IoT, 5G, and machine learning are some of the emerging technologies. These technologies are applied across various industry verticals. As data generation skyrockets, there's a greater need for servers that can handle this information efficiently.
Healthcare, life science, and finance use these advanced technologies. Smart agriculture and infrastructure benefit from these developments too. Manufacturing, retail, and logistics sectors adopt these technologies. Aviation and defense systems also utilize these advancements. This widespread implementation drives demand for robust server and switching solutions tailored to specific industry needs.
5G has significantly boosted many industries' capabilities. It provides high-speed data transmission and widespread internet coverage. This expanded coverage has also widened the customer base.
Data loads have also increased significantly as a result. Data must be transferred to servers at higher bandwidths. This requires advanced network switches for efficient operations. As businesses expand their operations and customer bases, they require scalable server and switching solutions that can grow with their needs.
Principal Consultant
From 2019 to 2023, the market for Server and Switching Equipment decreased at a 4.6% CAGR due to the impact of a devastating pandemic. Governments in several countries imposed complete/strict lockdowns during the first two quarters of 2020 to stop the spread of the virus. Several key equipment manufacturers globally temporarily shut their facilities to prevent the spread of the virus.
The pandemic also required enterprises to quickly convert to a work-from-home model, resulting in the adoption of online platforms to assure company continuity and remote learning. This demanded the implementation of effective network services and solutions.
The introduction of 5G technology, expanding usage of smart devices, increased penetration of internet access, and technological breakthroughs all had a favorable impact on demand for network equipment devices and infrastructure. Remote work and remote learning have accelerated the deployment and acceptance of 5G services.
Tier 1 companies include industry leaders with annual revenues exceeding USD 100 Billion. These companies are currently capturing a significant share of 55% to 60% globally. These frontrunners are characterized by high production capacity and a wide product portfolio. They are distinguished by extensive expertise in manufacturing and a broad geographical reach, underpinned by a robust consumer base.
Prominent companies within Tier 1 include Cisco Systems, Dell Technologies, Lenovo Group Limited), Huawei Technologies, and Hewlett Packard Enterprise (HPE) among others.
Tier 2 includes most of the small-scale companies operating at the local level serving niche Servers and Switching Equipment vendors with low revenue. These companies are notably oriented toward fulfilling local demands. They are small-scale players and have limited geographical reach.
Tier 2, within this context, is recognized as an unorganized segment, denoting a sector characterized by a lack of extensive structure and formalization when compared to organized competitors.
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The section below covers the analysis of the server and switching equipment industry in different countries. Demand analysis of key countries in several regions of the globe is provided.
The United States is anticipated to remain at the forefront in North America, with a value share of 62.3% in 2034. In South Asia, India is projected to witness a CAGR of 8.4% through 2034.
| Countries | CAGR 2024 to 2034 |
|---|---|
| India | 8.3% |
| Germany | 8.1% |
| China | 7.3% |
| The USA | 6.9% |
| Japan | 6.7% |
Cloud computing is rapidly gaining acceptance in the United States. Data center expansion is also increasing in the country. These trends boost demand for reliable server infrastructure. Switching infrastructure is also in high demand.
The USA has a developed technological ecosystem. Significant investment in R&D is also common in the country. This allows for faster deployment of cutting-edge solutions. Advanced infrastructure supports the growth of cloud computing. It also facilitates the expansion of data centers which requires these equipment in large quantities.
Moreover, regulatory frameworks that promote technology adoption and modernization in various industries contribute to the country’s strong position in the global server and switching equipment market. The country is also home to 50% of the world’s hyper-scale data centers, according to the United Nations Conference on Trade and Development’s Digital Economy Report 2021.
China’s growth comes from high next-generation network equipment penetration. The country tends to adopt new technology quickly. For instance, Huawei announced plans at its Global Analyst Summit 2022. They will investigate uplink spectrum reconstruction and ultra-high bandwidth.
Green air interfaces are also part of their research. ELAA-MM and native intelligence are other focus areas. These efforts aim to help operators build '1+1+N' 5.5G. They will also assist in upgrading network capabilities. Such developments make China one of the most lucrative markets for these equipment in the world.
Germany's market is expected to grow at 8.1% CAGR. The forecast period shows promising growth for the region. Rising collaborations are driving the regional market's growth. Partnerships are also contributing to market expansion. Smart city infrastructure spending is also increasing in Germany. These new projects have generated an excellent demand for these equipment in the country.
New product launches from leading companies boost the market. Telefonaktiebolaget LM Ericsson is a key player in Germany. Nokia Corporation also contributes significantly to the market. The German market benefits from these combined factors.
This section below examines the growth trajectories of the leading segments in the industry. In terms of product type, the rack segment will likely dominate and generate a CAGR of around 5.2% in 2024.
Based on end use, the IT & telecommunications segment is projected to account for a share of 27.3% in 2024. The analysis would enable potential clients to make effective business decisions for investment purposes.
| Segment | Rack Segment (product type) |
|---|---|
| Value CAGR (2024) | 5.2% |
The rack segment accounted for the largest market share, over 37%, in the market in 2023. Rack servers are configured to support a broad range of requirements and are individually mounted in a rack server's construction and design to suit high and low computing requirements.
Rack servers need less floor space, can be scaled up easily, and can be cooled instantly. The segment growth can also be attributed to the growing need for scalable data centers, high-density computing, and advancements in emerging technologies, such as IoT, cloud computing, and edge computing, creating vast growth opportunities for market players.
Rack servers provide a facility for computing and storing information at a lower cost, which helps companies establish servers for their private use.
| Segment | IT & Telecommunications (end-user) |
|---|---|
| Value Share (2024) | 27.3% |
Telecom operators use network equipment and infrastructure to provide telecommunications services such as telephone, data transfer, and computer networking, using a variety of communication technologies, including microwaves.
To meet the increased demand from this source, leading network equipment providers are offering telecom operators specialized networking services that use private networks with LTE and 5G connections. Such elements are also contributing to category growth.
The enterprise segment is anticipated to grow at a promising CAGR of 4.2% over the forecast period. Enterprise network equipment includes routers, switches, cloud management networking devices, and network security devices.
Network switches, gateways, routers, hubs, and modems may also be included according to the changing end-user requirements. Network equipment providers also offer enterprise-level networking equipment to ensure the safety of network functions. The enterprises demand high security of the networks, enabling private network equipment adoption.
The server and switching equipment industry is highly competitive, with several main companies and a variety of creative solutions. The server and switching equipment industry is highly competitive, dominated by major players like HPE, Dell Technologies, and Cisco. Continuous technological innovation, particularly in cloud computing and AI, drives competition as companies strive to offer cutting-edge solutions.
Industry Updates
In terms of type of equipment, the industry is segmented into servers (rack servers, blade servers, tower servers, micro servers, high-density servers) and switching (fixed configuration switches, managed switches, unmanaged switches, PoE switches, modular switches).
By data transfer rate, the industry is divided into 1G Ethernet, 10G Ethernet, 25G Ethernet, 40G Ethernet, 100G Ethernet, 200G & 400G Ethernet.
By deployment type, the industry is segmented into On-Premise, Cloud-Based, Public Cloud, Private Cloud, Hybrid Cloud, and Edge Computing.
By port density, the industry is segmented into low port density (Up to 24 Ports), medium port density (25-48 Ports), and high port density (Above 48 Ports).
By end user, the industry is segmented into IT & Telecommunications, Banking, Financial Services, and Insurance (BFSI), Healthcare, Government, Retail, Manufacturing, Energy & Utilities, Education, Transportation & Logistics, and Media & Entertainment.
Regions considered in the study are North America, Latin America, Western Europe, Eastern Europe, East Asia, South Asia, and the Middle East and Africa.
The industry was valued at USD 107.4 Billion in 2023.
The industry is set to reach USD 114.4 Billion in 2024.
The industry value is anticipated to rise at 7.6% CAGR through 2034.
The industry is anticipated to reach USD 237.5 Billion by 2034.
Cisco Systems, Dell Technologies, Lenovo Group Limited), Huawei Technologies, and Hewlett Packard Enterprise (HPE) are the key manufacturers.
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Server and Switching Equipment Market
