Intel’s 10G 'Romley' server to spur Ethernet switch growth

10G LAN-on-Motherboard to drop prices, increase adoption and require more switch ports

When Intel ships its long-awaited 10G-enabled server platform later this quarter, it's expected to have a significant impact on the Ethernet switching market.

Code-named "Romley," the Intel server features the company's Xeon E5 chips and an embedded or modular 10G Ethernet "LAN-on-Motherboard" (LOM) device. Romley will be targeted at both blade and rack mount servers, though 10G penetration on blade servers via Intel's Nehalem processors is well along, according to various industry reports.

Say goodbye to Fast Ethernet

Romley is expected to include copper-based 10GBaseT connectivity, which should drive down the price of 10G Ethernet and spur even wider adoption. That bodes well for Ethernet switching too, especially 10G Ethernet switching.

"With Romley-based servers incorporating more powerful processing, faster interconnects, and more IO, we believe the switching connectivity will have to be upgraded to 10GbE," states Oppenheimer & Co. analyst Ittai Kidron in a bulletin on the impending arrival of Romley. "Thus, we expect the Ethernet switch market to see a significant boost, doubling its (year-over-year) growth rates in 2013/14."

Kidron's conclusions mirror those of Dell'Oro Group, which expects fixed 10G Ethernet to comprise the majority of revenue in Ethernet switching by 2016 due to data center requirements for the higher-speed ports. This is due in large part to the migration of servers from Gigabit Ethernet to 10G Ethernet LOM this year.

In the next five years, 10G Ethernet ports shipped will increase more than sevenfold, to 62.2 million from 8.5 million, according to Dell'Oro.

Oppenheimer expects first-generation Romley-based server volumes to gradually build through the second half of this year, and strongly throughout 2013 and 2014. Concurrently, the firm expects "a quick upgrade cycle" with 10G server attach rates growing from 33% in 2012 to 60% in 2013, and 90% in 2014.

This will fuel growth of 10G top-of-rack and core switches in data centers, Oppenheimer posits. The firm raised its 2012 Ethernet switch forecast to 4% year-over-year revenue growth -- reaching $20.3 billion -- from 3%.

For 2013, Oppenheimer expects 9% growth to $22.2 billion, and a 10% jump in 2014 to $24.4 billion. The firm, though, believes its estimates are conservative even though the consensus ranges from 3% to 5% compounded annually, with Dell'Oro expecting about 6%.

Dell'Oro also expects these trends to spur adoption and growth of 40G/100G Ethernet as well to serve as aggregation ports for 10G and inter-switch links between data centers and cloud providers. Dell'Oro expects 40G/100G Ethernet to be a $3 billion market by 2016.

Market leader Cisco is likely to see substantial gains in its switching business from the Romley roll-out, according to Oppenheimer.

"We believe Cisco's switching revenues could grow in the 7%-11% range in CY13 and 8%-12% range in CY14, driving a 40%-50% increase to current consensus total revenue growth rates," Kidron states in his bulletin. Dell, IBM, Arista Juniper and Brocade are also likely to see "solid growth" in their switching business from the Romley transformation.

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