- Global router revenue is on a downswing, Dell’Oro reports, as service providers sift through excess inventory
- Cisco, Huawei and Nokia were the top router suppliers for the first half of 2024
- China’s router market slightly dipped in Q2, which was “a bit of surprise,” said Dell’Oro’s Jimmy Yu
The service provider router market suffered a setback in the second quarter of 2024, Dell’Oro reported, with inventory overload being the usual culprit.
Router revenue fell 33% year-over-year, a drop that’s “one of the worst we have seen in this market for over a decade,” according to Dell’Oro analyst Jimmy Yu.
The downswing kicked off after the service provider router market posted “record revenue” (over $4.1 billion) in Q2 2023, he told Fierce. At the time, growth was fueled by demand from hyperscalers and increased component supply.
But the market wasn’t immune to the common pain point facing telecom equipment vendors – orders stalling as service providers deal with excess inventory.
This “digestion” period is “one of the key drivers to the recent market contraction in service provider equipment,” said Yu.
The good news is we may not be hearing about inventory woes for much longer, both in the router and optical transport markets.
“I am not positive if the inventory correction is done, but based on some vendor comments about service providers placing more orders, I do get the sense that the rate of order growth is on the upswing,” Yu said. “Now it is a matter of timing—the time it takes to convert orders to revenue.”
Cisco, Huawei and Nokia were the top router suppliers for the first half of 2024.The latter two were the only vendors “to gain more than one percentage point of revenue share compared to last year,” Dell’Oro noted.
Not exactly a lot to work with. “The market share gain was really a matter of whose revenue declined the least among the vendors in this market,” Yu said.
The China router market saw a slight sequential dip in the second quarter, which Yu said “was a bit of a surprise,” as service providers typically spend “a large amount of their capex” in China during this period.
Perhaps Huawei’s new $1.4 billion R&D center in Shanghai, which is slated to begin operations later this year, will boost some growth in China’s market.
Core routers, which aim to quickly transmit data across the network backbone, faced “the steepest decline” this quarter, Dell’Oro found, with revenue declining 50% YoY. That’s likely because the core router segment had “a bit of catching up” to do on the inventory side, Yu noted, as it began its “correction phase” later than the edge router market.
