| | | Silicon Wave Rises in Data Center
eetimes.com
Alan Weckel, 650 Group
3/30/2017 02:10 PM EDT
A golden wave of excitement around merchant Ethernet switch chips for the data center is rising with new investments from traditional suppliers and startups.
Ethernet switch merchant silicon investments in the 10 Gbits/second space were very limited, with Fulcrum (Intel) being the most famous vendor to battle Broadcom’s dominance in the market. Cavium, with its acquisition of Xpliant in late 2014 sparked new interest. Now Barefoot, Innovium, a resurgent Marvell, Mellanox, Centec, as well as others with yet unannounced products have joined Cavium and Broadcom to chase the merchant silicon market in the data center.
The Ethernet switch merchant silicon market has become far more attractive to vendors for two reasons. First, the cloud is the fastest growing segment in data center switching and about to become the market’s largest segment. There is an allure in chasing after business from Apple, Amazon, Facebook, Google, and Microsoft.
Second, merchant silicon products are expanding their scope beyond traditional data center switching and into transport networks that connect data centers together, commonly referred to as the DCI market. Cloud providers are looking for one unified class of product to become their data center core and transport solutions.
Transport networks represent a significant expansion of the total addressable market. Silicon providers and system vendors see this transport market as 100% green field and as a higher ASP opportunity than the leaf/spine (top-of-rack) market which has become highly commoditized.
Over the past three years, most Ethernet switch platforms that have come to market have used merchant silicon (see chart above). Even Cisco’s Nexus 9000 family launched with merchant silicon.
It wasn’t until late 2016 that Cisco began ramping its own Nexus ASIC. At the same time, Juniper took a similar strategy of using its own ASIC in the QFX10K. This has caused the market for merchant silicon to temporarily plateau, but we believe the longer term trend remains and that the growth portions of data center networking will deploy more merchant silicon compared to the declined enterprise segment.
With the ecosystem around 25/100 Gbits/s mostly filled out and the major supply constraints mostly behind the industry, it’s time to look forward as to what is next. The market for merchant silicon is about to undergo two significant inflection points.
First, cloud customers are each planning on adopting next generation silicon at different rates. This is an opportunity and threat to the supply chain. The opportunity is clear, there are several technology insertion points at each cloud account over the next several years where there is limited benefit to the incumbent.
The threat is that the supply chain beyond the system and merchant silicon companies in under pressure, especially on the optics side. Simply put, there are too many intermediate steps between now and 400 Gbits/s for each supplier to invest and offer everything.
The go-to-market for merchant silicon will also undergo several inflection points by 2020. First, merchant silicon vendors will have to engage directly with cloud customers to directly show how they differentiate. Getting products to market will require using traditional switch vendors and direct ODMs as most cloud providers procure product through both.
The merchant silicon vendors will then have to decide how to expand into the tier-two cloud, telco service providers and enterprise space in order to reach sufficient volumes. We estimate that it will take at least 10 percent share in the merchant silicon market in order to have long-term viability which is a market larger that winning just one or two large cloud accounts.
--Alan Weckel is founder and technology analyst at 650 Group, focusing on the data center, the cloud and the Internet of Things.
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