MANHASSET, N.Y. Analysts report that while overall shipments and demand for Ethernet switches grew strongly in 2003, manufacturer's revenue actually fell. According to a just released report from In-Stat/MDR, total port shipments rose 16.0% from 166.3 million ports shipped in 2002 to 193.0 million ports shipped in 2003. However, due to sharply declining ASPs over the year, overall manufacturer's revenue declined 11.8%, from $13.0 billion in 2002 to $11.4 billion in 2003.
In addition to a gradually improving global economy, In-Stat/MDR found that the following factors served to drive market growth in 2003:
A sharp increase in both the total number of endpoints connected to the LAN, as well as an overall increase in the diversity of connected endpoints.
An increasing diversity of traffic flows on the LAN, through network convergence, to include voice and video, as well as data.
Increasing integration with wireless networks.
Heightened security awareness and threat of cyber-attack.
A tighter integration with partner networks and necessary links beyond the LAN, such as to remote teleworkers.
An increasing need to replace aging equipment after three years of tight IT budgets (though budgets are still relatively tight and IT expenditures are still closely scrutinized).
A continuing drop in ASPs across all Ethernet switch product segments.
Analysts expect these factors to drive continued market growth through 2008, with total port shipments rising to 502.8 million ports shipped. In addition, according to analyst Sam Lucero, "These trends are causing an underlying technology shift in the Ethernet switch market, with increasing deployments of both L3 Ethernet switches and Gigabit Ethernet switches at the network edge, as LANs become both more intelligent and offer increased bandwidth."