Routers and switches are network connecting devices. Routers are network layered and are responsible for analyzing the shortest path for a packet to traverse from one network to another. Therefore, its primary objective is to act as a connector between networks. Switches help connect various input and output devices to one network.
Router and switches have become an essential commodity for almost all fields of life requiring access to the internet or connectivity of a local area network (LAN). They form the stepping stones of data exchange and connectivity. Thus, almost every sector is a customer (or a potential) consumer of routers and switches.
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Demand Outlook
The global market for routers and switches was valued at USD 39.0 billion in 2020 and is expected to grow at a CAGR of 2.48% between 2020 and 2025. The market for routers and switches can be segregated into five major categories. They are internet exchange routers, service provider core routers, multiservice edge routers, Ethernet service edge routers, and ATM switches. Of these internet exchange routers form the largest segment. The industry is expected to move towards a quantum shift due to the usage of high-speed Gigabit Ethernet making Ethernet service edge routers the fastest growing segment. The primary demand will come from the rising adoption of PoE. IoT and cloud computing along with the proliferation of Wi-Fi over devices to provide a comprehensive ecosystem will also result in enterprise WLAN equipment thereby aiding the growth of routers and switches.
Cost Drivers
The recent market trends are the proliferation of software-defined networking (SDN) and network functions virtualization (NFV) along with the growing adoption of 100G Ethernet switches. These will not only pose new demand for routers and switches but also result in technological innovation of network architecture and innovations related to hardware (network and switches in this case). The culmination of these will be a product equipped with the capacity of faster transmission of data packets. From a cost perspective, the products will have a greater bill value on the customer fueling the value-driven growth of the market.
The pricing strategies that are most commonly followed in the industry are fixed pricing and cost-plus pricing, both of which ascertain sizable profit margins upon sales. This will ascertain growing profitability per traction of routers and switches.
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