China Business Intelligence Network News: The artificial intelligence (AI) industry is an emerging industry with artificial intelligence technology as the core, covering hardware, software, services and other industrial chains. With the continuous upgrading of AI large models, upstream computing power-related industry chains such as switches are ushering in explosive growth opportunities.
1. Definition of switches
A switch means "switch" and is a network device used for electrical (optical) signal forwarding. It can provide an exclusive electrical signal path for any two network nodes connected to the switch.
Switching is a general term for the technology that sends the information to be transmitted to the corresponding route that meets the requirements according to the needs of transmitting information at both ends of the communication and is automatically completed by manual or equipment. Switches can be divided into WAN switches and LAN switches according to different working locations. The details are shown in the figure:
Source: Compiled by China Business Industry Research Institute
Second, the development policy of the switch industry
The relevant policies of the switch mainly involve the overall planning and support of the state for the information and communication industry, as well as the regulations and guidance on the technology, market and security of network equipment, especially switch products.
Third, the development status of the switch industry
1. Market size
According to the "2024-2029 China Switch Industry Market Prospect Survey and Investment and Financing Strategy Research Report" released by the China Business Industry Research Institute, switches occupy the vast majority of the market share in China's network equipment market, with a market size of about 59.1 billion yuan in 2022, a year-on-year increase of 17.96%, and about 68.5 billion yuan in 2023. Driven by emerging technologies such as cloud computing, big data, and the Internet of Things, the demand for efficient and reliable network connectivity is increasing, and the switch market size will continue to grow. Analysts at the China Business Industry Research Institute predict that the size of China's switch market will increase to 74.9 billion yuan in 2024.
Data source: China Commercial Industry Research Institute
2. Market structure
According to different application scenarios, switches can be divided into data center switches and non-data center switches. Ethernet switch revenue for data centers accounted for 47%, a year-on-year increase of 20.8%, and the corresponding port shipments increased by 3.7% year-on-year; Revenue from non-data center switches accounted for 53%, up 6.4% year-on-year, and the corresponding port shipments increased by 4.7% year-on-year.
Data source: China Commercial Industry Research Institute
3. Cost structure
The switch is mainly composed of chips, optical components, plug-ins, resistors, shells, PCBs and other resources. Among them, the cost of chips accounts for the highest proportion, reaching 32%. followed by optical devices, plug-in parts, resistor parts, housings, and PCBs, accounting for 14%, 10%, 10%, 8%, and 7% respectively.
Data source: China Commercial Industry Research Institute
4. Competitive landscape
In the Chinese market, the switch industry is highly concentrated, and a few companies such as Huawei, H3C, and Ruijie Network occupy the vast majority of the market share. Huawei, H3C and Ruijie Network have market shares of 35.8%, 32.4% and 14.6% respectively, showing a market pattern of oligopolistic competition. Cisco and ZTE have market shares of 4.8% and 2.1%, respectively.
Data source: China Commercial Industry Research Institute
Fourth, the switch industry key enterprises
1. Huawei
Huawei Technologies Co., Ltd., founded in 1987, is a leading global provider of information and communications technology (ICT) infrastructure and smart devices. Huawei's switches cover the data center network and campus product portfolio, including multiple series, such as the CloudEngine S16700 series, CloudEngine S8700 series, CloudEngine S5755-H series, and CloudEngine S5735-L-V2 series.
In the first quarter of 2024, the operating income will be about 178.45 billion yuan, a year-on-year increase of 36.66%; net profit attributable to shareholders of the parent company was about 19.65 billion yuan, a year-on-year increase of about 564%.
2. Unisplendour
Tsinghua Unigroup Co., Ltd. is mainly engaged in providing technology-leading full-stack ICT infrastructure and services such as network, computing, storage, cloud computing, security and intelligent terminals. H3C (H3C), a subsidiary of Tsinghua Unigroup, has a wealth of product lines and technical strength in the field of switches, and its product lines cover multiple levels from core to access, including core switches, aggregation switches, access switches and other series, such as H3C S9827 series, H3C S9900X series, H3C S7500E series, H3C S6800 series, etc.
In the first quarter of 2024, the operating income will be 17.006 billion yuan, a year-on-year increase of 2.89%; The net profit attributable to the parent company was 414 million yuan, a year-on-year decrease of 5.69%.
3. Ruijie network
Ruijie Network Co., Ltd.'s main business is the R&D, design and sales of network equipment, network security products and cloud desktop solutions. The main products are network equipment (switches, routers, wireless products, etc.), network security products (security gateways, next-generation firewalls, security situational awareness and identity management products, etc.), and cloud desktop overall solutions.
In the first quarter of 2024, the operating income was 2.147 billion yuan, a year-on-year decrease of 0.23%; The net profit attributable to the parent company was 20 million yuan, a year-on-year decrease of 98.32%. In 2023, the main products include network equipment and network security products, accounting for 72.79% and 7.41% of the overall revenue, respectively.
4. ZTE
ZTE Corporation is committed to providing customers with satisfactory ICT products and solutions, integrating "design, development, production, sales, and service", focusing on "carrier network, government and enterprise services, and consumer services". The main products and services are wireless products, core network products, wired products, servers, data center switches, data centers, cloud computers, servers, data center switches, data centers, distributed databases, home terminals, mobile phone products, etc. ZTE has a wide range of switches, covering a wide range of models from low-end to high-end, including but not limited to access layer switches, aggregation layer switches, and core layer switches.
In the first quarter of 2024, the operating income will be 30.578 billion yuan, a year-on-year increase of 4.92%; The net profit attributable to the parent company was 2.741 billion yuan, a year-on-year increase of 3.74%.
5. Industrial Fortune Federation
The main business of Foxconn Industrial Internet Co., Ltd. is cloud computing, communication network and mobile network equipment, and industrial Internet. FII's switch product line is rich, covering various models from low-end to high-end, especially in the field of high-speed switches, such as 800G switches, the company has deep R&D and production capabilities.
In the first quarter of 2024, the operating income will be 118.688 billion yuan, a year-on-year increase of 12.09%; The net profit attributable to the parent company was 4.185 billion yuan, a year-on-year increase of 33.79%.
Fifth, the development prospect of the switch industry
1. The development of the digital economy promotes the growth of the market demand for switches
In recent years, the scale of the mainland's digital economy has continued to grow and has become an important force driving the mainland's economic growth. With the acceleration of the development momentum of the digital economy, both the government and enterprises are accelerating the transformation of digital industrialization. In the process of digital industrialization transformation, switches, as important network equipment for the new generation of infrastructure, play a vital role, which realizes the efficient transmission and exchange of data in the network, and the demand is rising rapidly.
2. The growth of computing power demand drives the expansion of the switch market
Nowadays, the global AI and digital economy are developing rapidly, the scale of computing power is expanding, and the demand for computing power continues to rise. The high-speed data forwarding capability of switches is the cornerstone of high-performance computing, and in large-scale computing clusters, switches connect computing nodes together by quickly forwarding data packets to form a network with highly parallel processing capabilities. The rapid growth of computing power demand has led to the continuous expansion of the switch market.
3. Technological progress drives the development of the switch industry
As an important network device for next-generation infrastructure, switches are responsible for data aggregation and forwarding in the network. In recent years, with the popularization and development of artificial intelligence and cloud computing technology in mainland China, the intelligence and cloudification of the mainland switch industry have been continuously improved. Technological progress has driven the development of switches, so that switches can better meet market demand and have broad market prospects.
For more information, please refer to the "China Switch Market Prospect and Investment Opportunities Research Report" released by the China Commercial Industry Research Institute, and the China Commercial Industry Research Institute also provides industrial big data, industrial intelligence, industry research reports, industry white papers, industry status certificates, feasibility study reports, industrial planning, industrial chain investment map, industrial investment guidelines, industrial chain investment investigation & promotion meeting, "15th Five-Year Plan" and other consulting services.