Is the High End Router Market Set to Recover After Five Quarterly Declines?

December 11, 2024

In the rapidly evolving world of technology, market trends are often unpredictable and can shift dramatically in just a few months. The high-end router market is currently experiencing such a shift, having declined for the fifth consecutive quarter as reported by the Dell’Oro Group. This 19 percent decrease in the third quarter of 2024 is a stark reminder of the volatile nature of the tech industry. Despite the gloomy outlook for many vendors, Nokia has managed to rise above the fray, being the only company to increase router revenues year-over-year during this challenging period, resulting in a five percentage point gain in market share.

Market Stabilization Anticipated as Inventory Levels Normalize

Market Dynamics and Stabilization Predictions

According to Jimmy Yu, Vice President at Dell’Oro Group, the ongoing market contraction is partly due to abnormal inventory levels among customers, which have led to decreased orders and revenues for vendors. Yu suggests that the market will likely stabilize over time as these inventory levels return to normal, resulting in increased order flows and higher revenues for vendors. Nokia appears to be ahead of other vendors in exiting the correction phase, evidencing nearly a 10 percent increase in high-end router revenues, positioning them as a leader in this troubled market.

The market contraction has not been localized, affecting all geographical regions, though North America has experienced the steepest decline at 24 percent year-over-year. This sharp drop in North America is mainly attributed to excess customer inventory, which has led to a significant reduction in new orders. Despite these challenges, the top three vendors in the high-end router market by revenue share for the first nine months of the year are Huawei, Cisco, and Nokia. Cisco’s market share has decreased by six percentage points, while Huawei and Nokia have managed to increase their shares by two and three percentage points, respectively.

Report Findings and Anticipated Recovery

The 3Q 2024 Service Provider Router and Switch Report from the Dell’Oro Group has revealed several key findings, including a third consecutive quarter of the highest decline in core routers. However, it’s worth noting that revenue for core routers has remained stable on a quarter-over-quarter basis, indicating some level of resilience within this segment of the market. The broader market contraction affecting all geographies suggests a global trend rather than a localized issue, further emphasizing the need for vendors to adapt to changing market dynamics.

Looking ahead, the Dell’Oro Group projects a recovery in the high-end router market in 2025, anticipating growth of 4 percent as the inventory correction concludes and overall market conditions improve. Factors such as lower interest rates, normalized inflation rates, and general economic growth are expected to contribute to this recovery. Vendors that can navigate these turbulent times and adapt their strategies accordingly will likely emerge stronger in the coming years, with Nokia’s recent performance serving as a potential blueprint for others to follow.

Comprehensive Analysis of Service Provider Router and Switch Market

Detailed Statistics and Regional Analysis

The Dell’Oro Group Service Provider Router & Switch Report offers a comprehensive and detailed analysis of the service provider router and switch market. This report provides valuable qualitative insights and detailed statistics on manufacturing revenue by region, customer type, use cases, average selling prices, and unit and port shipments. Such detailed coverage is crucial for vendors looking to make informed business decisions and adapt to the ever-changing market landscape.

One of the key insights from the report is the importance of understanding regional market dynamics. The varying degrees of market contraction across different geographies highlight the need for vendors to tailor their strategies to specific regions. By closely monitoring regional trends and adjusting their approaches accordingly, vendors can better navigate the complexities of the global market and position themselves for long-term success.

Strategic Competitive Analysis and Future Outlook

In the rapidly changing realm of technology, market trends are often unpredictable and can change significantly in a short span. The high-end router market is currently witnessing such a shift, with a notable decline for the fifth consecutive quarter, as reported by the Dell’Oro Group. Specifically, this market experienced a 19 percent decrease in the third quarter of 2024, underscoring the volatile nature of the tech industry. While many vendors are grappling with this downturn, Nokia has emerged as a notable exception. Amidst these challenging times, Nokia has not only managed to maintain its position but has also increased its router revenues year-over-year. This achievement has resulted in a gain of five percentage points in market share. This growth is particularly remarkable given the current market conditions and highlights Nokia’s strategic prowess and resilience. Nokia’s ability to navigate through such turbulence provides a stark contrast to the broader industry’s struggles and sets a benchmark for others in the field to aspire to.

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