Why Cisco Got Into the Merchant Silicon Market

As DCK has highlighted before, merchant silicon is taking over the data center networking switch market. Even the largest, most deeply entrenched incumbents are reacting.

In December, Cisco made a startling entrance into the merchant programmable silicon market by introducing its Q100 chip as part of its new Silicon One strategy. Designed for data center switching and routing equipment, Q100 will be used in Cisco’s own data center networking equipment and sold to other switch vendors.

Cisco says it worked with Google Cloud to develop the new silicon, which is being trialed in its new 8000 Series routers by several cloud and telco providers. The Q100 P4-programmable chip supports up to 27x400GE ports and 10.8T throughput. It features deep buffering and high-bandwidth memory (HBM).

In another significant development, Broadcom released the Tomahawk 4 ASIC, which is currently shipping to select customers. Tomahawk 4 chips include four 1 Gbps Arm processors, which are built using a 7nm production process. These chips can handle up to 64x400GE ports and 25.6T throughput per chip. They also support in-band network telemetry.

Devan Adams, principal analyst at IHS Markit | Technology (now Omdia):

“Historically, data center switch vendors have deployed switches integrated with their own custom silicon, but they now are expanding their portfolios to include ASICs from third-party vendors. As a result, this noticeable market trend likely fueled Cisco to make its latest announcement.

The latest releases by Cisco and Broadcom prove that merchant silicon is having a huge impact on the market. This impact is only growing as silicon manufacturers cater their products to win business from hyperscale, tier-2 cloud and telco providers that have substantial buying power and that are continuously expanding their data-center infrastructure footprint.”

Market Context

Proprietary data-plane forwarding silicon used in data center switches is now facing intense competition from merchant silicon vendors like Broadcom, Intel (via Barefoot Networks), and Marvell.

While global shipments of data-plane forwarding chips for data center Ethernet switches are set to expand to 1.5 million units in 2023 – a 1.6 percent CAGR from 2018 – the proprietary segment of the market is expected to contract at a 9 percent CAGR in the same timeframe. That’s according to the latest Data Center Network Equipment Market Tracker by Omdia. (The market tracker is produced by IHS Markit | Technology, a brand that’s being retired along with other Informa Tech research brands, including Ovum, Heavy Reading, and Tractica, which are all now combined under a single brand: Omdia).

The merchant silicon segment of the market will rise at a 4 percent CAGR during the forecast period, while shipments in the more niche programmable chip segment will expand by a robust 25 percent, Omdia predicts.

According to Omdia, merchant silicon shipped in data center Ethernet switches will reach 62 percent of all silicon units in 2023 (up from 56 percent in 2018), while proprietary/custom silicon will top 22 percent (down from 38 percent in 2018), and programmable silicon will account for 16 percent, noticeably up from 6 percent in 2018.

omdia ihs switch silicon q3 2019

As higher-speed ports like 200/400GE are introduced, the number of silicon units shipped may decline during some time periods. However, these temporary fluctuations will soon be negated as average selling prices decline, making higher-speed units more affordable and available.

The Data Center Network Equipment Market Tracker is a part of Omdia’s comprehensive Data Center Networks Intelligence Service. This service provides quarterly worldwide and regional market size, vendor market share, and forecasts through 2023.