India’s networking market, which includes Ethernet switches, routers and the WLAN segment, witnessed a 26.7 per cent YoY decline in Q1-20, primarily because of the outbreak of COVID-19 and the subsequent lockdown in March.
By Sudharsan Raghunathan
A reduction in investments for on-campus infrastructure was the main driver for the slowdown in India’s networking market during Q1-20. Routers saw the maximum YoY decline of 48.4 per cent due to the effects of COVID-19, telecom AGR (adjusted gross revenue) dues, and huge one-time investments that happened during Q1-19. Other categories like switching and WLAN had YoY declines of 10.8 per cent and 16.8 per cent, respectively.
The Indian Ethernet switch market (January – March)
According to IDC’s ‘Worldwide Quarterly Ethernet Switch Tracker’, the Q1-20 Ethernet switch market in India stood at US$ 130.3 million (by vendor revenue), registering a YoY decline of 10.8 per cent. The decline was attributed to the low demand conditions caused by COVID-19 in India. Investments across multiple industries softened due to the lockdown, which led to remote working conditions, thereby impacting the investments made in on-campus infrastructure. Vendors dependent on China for raw materials and finished goods also got impacted due to the lockdown. The most investments for switches came from the services, telecommunications, finance, and government sectors.
Cisco continued to dominate the Ethernet switch market with a 57.4 per cent share during Q1-20, followed by Hewlett Packard Enterprise (HPE) and Dell Technologies.
The Indian router market (January – March)
According to IDC’s ‘Worldwide Quarterly Router Tracker’, the India router market in Q1-20 stood at US$ 69.2 million (by vendor revenue) with a steep YoY decline of 48.4 per cent. The slowdown in the router segment was due to the strong investments that happened in Q1-19, coupled with the effects of the pandemic and the AGR penalties. From a quarter-over-quarter (QoQ) perspective, telecommunications buying remained stagnant. However, the enterprise routing segment had a significant QoQ decline of 26.7 per cent.
The Indian WLAN market (January – March)
According to IDC’s ‘Worldwide Quarterly Wireless LAN Tracker’, the Indian WLAN market had a YoY decline of 16.8 per cent during Q1-20. The market stood at US$ 49.7 million (by vendor revenue). Consumer class routers were the most impacted segment, as most of the manufacturing was stalled in China during Q1-20, causing supply issues. However, demand for consumer class routers is expected to stabilise with the increasing need for remote working. Enterprise-class, Automatic Protection Switching (APs) also declined due to lower demand for campus infrastructure. Overall, consumer and enterprise-class WLAN declined by 20.5 per cent and 13.6 per cent, respectively.
With a market share of 20.9 per cent, Cisco gained the market leader position in the WLAN segment during Q1-20, followed by TP-Link and Hewlett Packard Enterprise (HPE).
While the pandemic will have an immediate negative impact in terms of infrastructure buying, COVID-19 will act as a catalyst in enabling the next wave of digital transformation among enterprises. Enterprise networking will slowly move away from point solutions to combining multiple aspects of networking and security under fabric to support the shifting work patterns. Location-based analytics will also play a key role post lockdown, enabling enterprises to trace contacts and monitor social distancing. The COVID-19 situation will enable enterprises to revisit their strategies around the cloud, collaboration and security.
The India forecast
The CAGR of the Ethernet switches, routers and WLAN market is expected to be in single digits through the period 2018–2023. Increased adoption of emerging technologies such as the cloud, IoT, mobility, etc, will drive incremental revenues. IDC also expects large investments during the 5G rollout over the next couple of years.
The author is a senior market analyst, enterprise networking, IDC India.