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The Market Returns to Normalcy

The COVID-19 pandemic resulted in a tumultuous year for the Service Provider (SP) Router market. The onset of the pandemic in the first quarter of 2020 caused an immediate downturn in the SP Router market when supply chains were severely disrupted. We estimated that the supply chain disruptions caused a $450 million shortfall in the first quarter, essentially eliminating all of the full year 2020 market growth that we projected prior to the pandemic. Following the initial shock of the pandemic, vendors made remarkable adjustments to their procurement, manufacturing, assembly, and distribution processes to get their businesses back to pre-pandemic levels.

From a demand perspective, the pandemic forced SPs to deal with the conflicting dynamics of managing network traffic surges and making network investments under uncertain economic conditions. The traffic surges—owing to millions of people relying on the Internet during lockdowns—were handily absorbed by networks without substantial capacity upgrades. Ultimately, the unexpected growth in traffic proved the robustness and resiliency of network architectures.

In the ensuing months, traffic growth moderated and even contracted in some cases. Nonetheless, IP networks are transporting more traffic than ever and are likely running at higher utilization levels compared to pre-pandemic times. We expect SPs to boost network capacity and reset their operational metrics for the new traffic levels and patterns—returning to pre-pandemic practices.

 

400 Gbps Routers Become Meaningful

The deployments of routers supporting 400 Gbps ports and optical modules will enter the early adopter stage in 2021. While large-scale deployments will be limited, there will be enough shipments to drive growth of the SP Core Router market for the first time since 2017.

 

IP Mobile Backhaul Upgrades Accelerate

The China market will remain at the forefront of the 5G IP backhaul market. Telecom SPs in China will continue making large-scale upgrades to their IP backhaul networks simultaneously with their aggressive 5G RAN buildouts—an approach that differs from most other SP’’s 5G RAN deployments. In markets other than China, upgrades of IP backhaul networks will proceed at a more modest rate—in some cases to support 5G rollouts, in other cases to address 4G traffic growth and the eventual transition to 5G.

 

Disaggregated Routers Become A Real Thing

Disaggregated routers—white box hardware with independent operating system software—are set to capture meaningful market share in 2021. Early adopters are moving from trials to live deployments, but the timing of manufacturers’ revenue is difficult to predict, especially with new software. Initial use cases will be for mobile backhaul (cell site gateways) and backbone networks.