A year ago, we made a number of predictions for the Service Provider Router market. As we move full steam ahead into a new year, we take a look back at those 2021 predictions, and how we think they apply to the SP Router market in 2022.
The Market Returns to Normalcy
In some ways, SP Router market conditions returned to pre-pandemic states in 2021, but in other ways, they did not.
From a quantitative perspective, the Service Provider Router market rebounded nicely in 2021 to pre-pandemic levels. Our preliminary estimates show that market revenues increased at a mid-single-digit rate to a record level. As we had predicted, Telecom and Cloud SPs increased spending in 2021 to boost IP network capacity and reset operational metrics to better align with the new traffic levels and patterns brought on by the COVID-19 pandemic.
However, supply chain disruptions and resource constraints continued to negatively affect product delivery and deployments throughout the year. While it is difficult to quantify the impact of these problems, consistent feedback from vendors, SPs, and distribution channels lead us to conclude that SP Router market revenue was depressed in 2021.
The good news for 2022 is that we expect underlying demand trends to continue driving growth of the SP Router market. The bad news is that we expect supply chain disruptions and resource constraints to persist throughout 2022. While we do not know when these disruptions will diminish—in 2022 or 2023—we predict that the return to normalcy will not be without problems. The volatile order growth and expanding backlogs that created so many challenges over the past two years will eventually subside. However, as order growth rates decelerate and backlogs shrink when supply and resource constraints improve, the challenges of balancing supply and demand will create new headaches for many companies.
400 Gbps Routers Become Meaningful
Market demand for routers that support 400 Gbps technologies steadily gained momentum throughout 2021 and became an industry focal point by the end of the year. Our preliminary estimate for 400 Gbps router port shipments shows an increase of more than ten times from 2020 to 2021–an excellent start for the early-adopter phase of emerging technology.
2022 is shaping up to follow on the initial success of 400 Gbps capable routers. For this year, we predict rapid demand growth for 400 Gbps routers that will firmly establish network capacity transformations over the next five years.
IP Mobile Backhaul Upgrades Accelerate
Our prediction of IP mobile backhaul market acceleration in 2021 proved to be correct for all major geographies except China. Our preliminary estimates for IP mobile backhaul revenue for markets excluding China ticked up at a double-digit rate in 2021. The China market experienced a slight decline in 2021, but still represented more than a third of the global market.
For 2022, we predict continued growth for IP mobile backhaul upgrades outside of China. 5G RAN deployments are the basis for most of the growth and the longer-term prospects for 5G are quite positive.
Disaggregated Routers Become a Real Thing
The market for disaggregated routers grew significantly in 2021, and our initial estimates point to a triple-digit revenue growth rate for the full year. Granted, the revenue growth was off of a small base, but another positive sign was that throughout 2021, the ecosystem for disaggregated routers continued to expand across hardware, software, and integration elements.
The disaggregated router market proved to be real in 2021, but it remains to be seen whether the market can become significant. We see many positive signs of opportunities such as a growing ecosystem and increasing trial activities. However, we predict that in 2022, the portions of the disaggregated router market will increasingly encounter the challenges that many emerging technologies face—ongoing interruptions from the COVID-19 pandemic, competitive responses from incumbent players, and resistance to change large and established infrastructures.