Major strategic deals involving Marvell, NVIDIA, and Arista reshape the data center networking and infrastructure landscape.
As data center switch vendors reduce their reliance on proprietary and custom silicon, merchant silicon adoption is expanding beyond white-box vendors into the portfolios of traditional vendors. According to IHS Markit's Data Center Network Equipment Market Tracker forecast, this shift reflects a fundamental restructuring of the data center switching market. Merchant silicon is projected to reach 62% of all silicon units in data center Ethernet switches by 2023, up from 56% in 2018, while proprietary and custom silicon will decline to approximately 25%, down from 38% in 2018. Programmable silicon is expected to account for 13% by 2023, rising from 6% in 2018.
The five-year compound annual growth rate projections underscore the trajectory of this transition. Between 2018 and 2023, growth in data center Ethernet switch data plane forwarding silicon units will be driven by programmable silicon at a 20% five-year CAGR and merchant silicon at a 5% five-year CAGR, while proprietary units will decline at a negative 6% five-year CAGR. Recognizing these market trends, Intel, Marvell, Nvidia, and Arista have moved rapidly to acquire talent, IP, and technology that position them to capitalize on this shift.
Intel's acquisition of Barefoot addresses the company's diminished presence in the enterprise switching market, as Broadcom's merchant silicon has come to dominate data center switching. The Barefoot deal enables Intel to offer a complete solution that addresses ASICs for Ethernet switches, a business in which it once held a major stake. Similarly, Marvell's acquisition of Cavium expanded its data center networking portfolio beyond its legacy offerings, bringing together an engineering team specializing in Cavium's Xpliant programmable switch silicon for data centers with Marvell's Prestera switch team, creating what the analyst team expects will provide an uplift to Marvell's presence in the data center switch silicon market.
Nvidia's 2019 acquisition of Mellanox represents a strategic expansion beyond its traditional focus on dedicated server components. The companies had previously collaborated on the world's two fastest supercomputers, Sierra and Summit, operated by the US Department of Energy, and many of the world's top cloud service providers use both NVIDIA GPUs and Mellanox solutions. The acquisition of Mellanox resources positions Nvidia to extend its portfolio into other growing parts of the cloud and data center markets.
Arista, which achieved a 16% market share in data center switching in 2018 under the leadership of Chief Development Officer and Chairman Andy Bechtolsheim, previously from Sun Microsystems, and President and Chief Executive Officer Jayshree Ullal, previously from Cisco Systems, has also pursued acquisitions to expand its addressable market. The Mojo deal shows Arista expanding from its data center-only target market to bring the principles of networking used by cloud providers—scalability, merchant silicon, and software control—to campus networks. Switches developed following the Metamako acquisition are designed for ultra-low latency, high-precision use cases such as those in the financial trading business, further broadening Arista's market opportunities.