Communications & Networks

China's network switch revenues grew to 2.18 billion Yuan in 1Q 2008, up 5.11% YOY. This growth rate increased, compared to 1Q07 YOY growth of 4.05%. Growth is driven by infrastructure needs to support China's growing number of broadband users and businesses.

Few high-end switch vendors continue to dominate.

In 1Q 2008, China's high-end switch vendors continue to be Cisco, H3C, and Huawei. Product highlights include:

• Cisco's Nexus 7000 offers massive scalability, a new Cisco-developed Linux operating system, a new management interface and Cisco's Trusted Security (TrustSec) architecture. This has become a mainstream product in the high-end.
• H3C's S7500E series, launched in later 2007, continues to perform well. It offers integrated services such as the Multiple Protocol Label Switching (MPLS) services, IPv6, network security, wireless services and passive optical networks. The product is well positioned for many of China's industries, including electric power, government, education, financial services, manufacturer, and telecom.

More vendors compete in the mid- to low-end.

These include Cisco, Huawei, H3C, Nortel, ZTE, BDCom, Fiberhome Network, Maipu, Ruijie, and Harbour Networks. Product highlights include Juniper's launch of its EX4200 in this quarter. Given Juniper's strength in brand and sales channels, this move will impact and shuffle some competition.

Government and financial services are the main drivers for growth in China.

China's government initiatives, such as "Digital City" and "Safe City project 3111" (by China's Ministry of Public Security), requires network-based e-government applications, which in turn drives network switch growth. China's financial services industry is relative advanced in its IT build-out. However, the securities sector is seeing a second wave of development, further driving switch demand.

Moreover, with the launch of China's 3G networks, telecom operators are building out their infrastructure for VoIP, IPTV, and mobile Internet.

Looking ahead, CCID Consulting sees emphasis on virtualization, 100000M Ethernet, and smart switches.

New switch products will incorporate more virtualization. Virtualization offers the compelling proposition of better leveraging existing technology equipment and assets. Network upgrades can be performed with less cost and disruption.

100000M Ethernet switches will meet the high performance needs of growing applications like IPTV, operator-grade networks, remote networked storage and data centers, especially in China's telecom and education sectors.

Smart switches will spread from the network core to the edge, as emerging and more complex applications demand more intelligent management throughout the network. A core-edge distributed intelligent switching architecture will be formed, with products to support such architecture.

For more information

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Unless otherwise specified, all information provided is sourced from CCID Consulting.

Ó 2008 CCID Consulting Co., Ltd.