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Coronavirus Is Bad and Good News for the Data Center Switch Market

After a beating in the first half, Omdia analysts expect the market to roar back in the second six months of the year.

After taking a beating in the first half of the year, the data center networking switch market will roar back in the second half.

That’s according to market analysts at Omdia. In their estimate, massive supply chain disruptions and companies holding tight to their cash, all caused by the coronavirus pandemic, will result in a nearly 10 percent drop in revenue in the first six months of 2020 compared to the same period last year.  However, they expect switch suppliers to generate 20 percent more revenue in the second half of the year than they did in the second half of 2019.

The pandemic’s effects on the market have ranged from component supply and manufacturing disruptions to slower reseller and end-user sales, Devan Adams, principal analyst at Omdia, said. The impact, predictably, started in Asia, where much of the data center hardware componentry is produced, and then rippled out to Europe, North America, and elsewhere around the world.

“Supply shortages have slowed or halted shipments of data center equipment around the globe as workforces dwindle and non-essential businesses suspend operations,” Adams said in a statement.

Based on data from its Data Center Network Equipment Market Tracker, Omdia expects data center switch suppliers to make $5.4 billion in revenue in the first half of 2020 (down from $5.9 in the first half of 2019) and $7.3 billion in the second half (up from $6 billion in the second half of last year).

Omdia and DCK are both part of the Informa Tech family of events, research, and media brands.

omdia covid switch chart apr 2020.png

Also good news for switch sellers (and for the data center market as a whole) is the pandemic-driven crystallization of how essential digital infrastructure is for the society to continue functioning.

“Data centers are experiencing massive surges in consumer internet usage due to the coronavirus-inspired increase in demand for e-learning, remote working, binge television watching, and other activities,” Adams said. “This is good news for many switch vendors, whose products are key elements in handling the traffic bursts data centers are experiencing.”

However, Omdia added a caveat that the market is currently sending “mixed signals,” making it difficult to make projections for the future with full confidence. Surges in demand for digital services have been accompanied by many businesses considered “non-essential” either laying off employees and slashing budgets or shutting down completely.

Some large service providers are trying to help them to the extent possible via donations, relief funds, and bill payment relief.

As the market adjusts to these conditions, “purchasing behavior changes are inevitable,” Omdia said. Its analysts expect to adjust their forecasts throughout the year as the environment shifts.

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