IDC: AI drives data center switch upgrades and expansion, with a year-on-year growth of 5.9% in 24 years.

Recently, International Data Corporation (IDC) released the "2024 Network Market Tracking Report". IDC data shows that the global network market size in 2024 was $64.51 billion, a 9.7% decrease from the previous year. The growth rates of the switch, router, and WLAN markets were -5.4%, -19.1%, and -12.7% respectively. The size of the Chinese network market was 69.68 billion RMB, a 4.3% decrease from the previous year, with the switch, router, and WLAN markets growing by 5.9%, -17.6%, and -13.1% respectively. Tasks such as AI model training and data analysis require a large amount of computing resources and high-speed data transfer, which has led to the upgrade and expansion of data center switches in the global network market, making data center switches the only product to achieve positive growth in 2024. Wang Zijian, research manager at IDC China, stated that in 2024, the Chinese network market was strongly driven by AI, with explosive development and rapid popularization of AI technology, effectively integrating into various aspects of the network market, from underlying technology architecture to upper-level application scenarios, all having a profound impact. With the emergence of DeepSeek, its efficient algorithms and low computing power input, not only stimulated domestic research on AI innovative thinking, but also provided opportunities for small and medium-sized enterprises to enter the field of AI and improve production efficiency using AI technology. As the upstream and downstream of the relevant industry chain develop in a coordinated manner, the Chinese network market will form a virtuous cycle of equipment investment, business transformation, capital influx, and re-investment in equipment. Global Market With the development of global artificial intelligence technology, the demand for AI computing power by enterprises and data centers has sharply increased. The campus switch experienced strong growth from 2021 to 2023, with enterprises and channel partners accumulating high inventory levels as the supply chain recovered. In 2024, entering a digestion phase led to a significant reduction in investment, while macroeconomic uncertainty made enterprises more cautious in IT investments, leading to investment shrinkage in both enterprise routers and the WLAN market. The operator router market saw the largest investment decline in nearly a decade due to inventory backlog and slowdown in 5G construction. Chinese Market The overall performance of the Chinese network market in recent years has stabilized, with varying progress in informatization construction in various industries and different product performances. (Note: The following data is based on the Chinese RMB currency.) The Chinese switch market grew by 5.9% year-on-year in 2024, with the data center switch growing by 23.3% year-on-year. Operators coordinate the construction of multi-node intelligent computing centers and platforms and put them into use successively, which drives investment in data center switches. In vertical industries, with the support of AIGC, internet and IT service companies have made significant investments, financial customers remained largely unchanged due to framework adjustments, and governments made significant investments in intelligent computing infrastructure planning. Within the data center switch products, AIGC drove 200/400G equipment revenue growth by 132.0% year-on-year, and port shipments increased by 166.5% year-on-year. Campus switches saw a 9.2% year-on-year decrease, similar to global supply chain trends, compounded by the current economic downturn affecting corporate investments, with limited budgets more inclined towards intelligent computing investments. The mature application of Wi-Fi 6 devices drove a 30.7% year-on-year increase in revenue for 2.5/5G multi-rate devices, with a 48.5% year-on-year increase in port shipments. The router market saw a 17.6% year-on-year decline, with the operator router market falling by 21.0% year-on-year. The slowing growth of internet traffic and the delay in centralized procurement affected core equipment investments, with small-scale deployment of 400G and pilot innovations in intelligent computing beginning. The current return on investment in new metropolitan area network (MAN) equipment is not ideal, and the late stage of 5G construction is affecting MAN equipment investment. It is expected that in 2025, operators will further reduce spending based on investment cutbacks, with a bias towards investment in intelligent computing. The enterprise router market fell by 4.3% year-on-year, with major industries such as finance, government, and energy seeing significant declines in investment due to budget and construction pace influences. High-end and mid-range routers saw a stable overall investment trend, with demand remaining for provincial and municipal level construction projects and a trend towards expansion into counties. Low-end and SOHO routers aimed at small and micro-enterprises faced operational challenges. The WLAN market saw a 13.1% year-on-year decline, with most industries such as education, government, and healthcare experiencing downward trends. Particularly in education, as the largest industry in the WLAN market, policy and user investment factors led to a significant decline, which had a significant impact on the overall market. The decline in the WLAN network market is the result of a resonance of market saturation in the late stage and the macro environment, exacerbating factors such as the dilemma of "saturated traditional demands and insufficient new scene drives" and market differentiation during the transition period of technology. In the enterprise WLAN market, Wi-Fi 6 products have become the absolute mainstream standard, with the marketization process of Wi-Fi 7 accelerating, surpassing 5 billion RMB in shipments for the whole of 2024. Additionally, WLAN products are increasingly integrating with technologies such as intelligent operation and maintenance, security protection, to provide users with scene-specific high-value solutions. It is expected that the compound growth rate of the Chinese enterprise WLAN market will reach 4.8% over the next five years.