Sci-Tech Information: Competition in China"s Router Market Intensifies
A smart router is different from a traditional router as it offers a wider range of functions and can connect two or more data lines from different networks. Operating a traditional router is also more complicated, and most consumers are incapable of installing the device themselves so they have to turn to a professional to set up it up for them.
Before the popularization of smartphones, traditional Chinese wireless router suppler JCG was the first to propose the "smart wireless router" concept. In March this year, HiWiFi took advantage of online marketing to promote the concept of the smart router among consumers. HiWiFi was able to get an investment of up to US$10 million, which is considered the biggest offered to a hardware firm in China after phone maker and internet service provider Xiaomi.
Zhang Jiansheng, an analyst at Shenyin & Wanguo Securities, said that compared with a traditional router, a smart router offers functions including higher speed for playing games and online videos and remote control from mobile phones and allows the use of a USB to expand storage. He added that the price is much cheaper as well.
Wang Jun, an analyst at Analysys International, said that a smart router was not only equipped with traditional functions, but it also served as a center for household cloud computing.
Huang Jiangji, co-founder and vice president of Xiaomi, said that the new Xiaomi router acts as an internet center, which enables a Xiaomi smartphone, Xiaomi television and other data sources to connect to one another through the smart Wi-Fi router.
Beidu, Xiaomi and Xunlei are developing this market with a view to cater for family cloud computing services. However, with internet companies tapping into the market, the revenue generated from hardware sales has been constrained. Traditional hardware suppliers, such as TP-Link, Tenda and Netcore, whose business models are based on price competitiveness in hardware sales, are facing a significant challenge.
Figures showed that the size of the current router market in China was pegged at 350 million units and demand for an additional 50 million to 60 million units of routers was expected each year, which covers the majority of households in China. Meanwhile, the scale of the router market is expected to touch between 5 billion and 6 billion yuan (US$823.6 million- US$988.4 million) per year, taking into account the average price of 100 yuan (US$16.50) for a router.
Service provider edge router market to approach $9 billion in 2018
According to a newly published report by Dell'Oro Group, the trusted source for market information about the networking and telecommunications industries, investment in routers for mobile backhaul networks will be the primary driver for the Service Provider Edge Router market through 2018. The demand for these routers is expected to propel the worldwide Service Provider Router market to almost $9 billion by 2018.
"As LTE networks are being deployed in China and across Europe, router demand in mobile backhaul networks is taking off, with service providers expanding capacity to handle data traffic generated by LTE users," said Alam Tamboli, Business Analyst at Dell'Oro Group. "In North America, we witnessed a rapid deployment cycle, whereas in the case of Europe, we expect the cycle to be longer due to differences in the competitive landscape and a larger population size," added Tamboli.
North America drove worldwide demand for routers in mobile backhaul networks from 2009 through 2013. LTE coverage in this region is now largely complete and several of the service providers have begun to taper their investment levels there.
The Service Provider Edge Router market is a subset of the Service Provider Router market. The Service Provider Router market also includes the Service Provider Core segment. Both segments are covered in the Dell'Oro Group Routers 5-Year Forecast Report. In addition, the Enterprise High End and Access Router markets are also analyzed in depth.
2013 Router and Switching market ends year with slight increase
The Worldwide Carrier Routing & Switching markets decreased revenue 0.5% in Q4 but increased slightly 0.7% for the entire year. In spite of positive growth and doubling of profitability reported by Tier 1 providers, ACG Research anticipates a challenging market and aggressive competition will continue to put pressure on vendors' pricing and margins in 2014. €The long-term outlook for routers is evolving into an area that will be driven by network virtualization,€ states Ray Mota, managing partner. €Virtualized routers currently have limited functions and are just not sufficient for today's bandwidth demands. Service providers are judiciously spending, investing, upgrading and launching new projects but only on those that drive efficiency and vendors need to be mindful of this as they address SDN, virtualization and cloud.€
Growth in mobility and Big Data, capacity constraints, and interest in software-defined networking and virtualization has instigated a significant shift in networking. Momentum for software-defined networking has increased because SPs are searching for a new way to deliver services and realize OpEx savings. Providers need new solutions specifically designed to address these issues. Next-generation infrastructure platforms will need to meet massive capacity and scaling requirements. Providers are demanding converged solutions that include optical and LSR functionality, especially in metro regional networks in order to lower the cost per bit of transport and routing. Adding application awareness to a converged solution will also enable service providers to meet their performance and scale demands while increasing control and enabling service innovation, all with significantly improved economic efficiencies.
Q4 Total Worldwide Carrier Routing & Switching market posted revenue of $2.9 B. Core Routing revenues were down 0.8% q/q but up 16.3% y/y. Edge Routing and Switching revenues were down 0.4% q/q and down 2.8% y/y.
Although Alcatel-Lucent is benefiting from the growth in IP core, which continues to see increases in 100GE adoption, providers refreshing core routers, increases in IP-Optical convergence and investigation of SDN, the company decreased 1.6% q/q and 5.7% y/y. The company benefited from CapEx spending in the first three quarters of 2013 but which dried up in Q4. Cisco, as the company projected, posted a total worldwide decline of 7.4% q/q and a decrease of 2.4% y/y. In spite of the decreases Cisco is currently undergoing product transition and shifting to a virtualized product portfolio. The company was impacted by slowdown in emerging countries. Juniper posted increases of 3.2%, q/q and 15.3% y/y. Juniper reported that its MX line of edge routers drove growth (22%) in routing revenues.