The speed at which networking is evolving in the data center is accelerating. Four year cycles that we saw in the transition from 10 Gbps to 25 Gbps are shrinking and the 100 Gbps to 400 Gbps port cycle will occur even faster. The market will move from 56 Gbps SERDES to 112 Gbps SERDES in less than two years. There are a number of reasons why we are in the midst of more rapid technology transitions, but it can be summed up by more intelligent and efficient infrastructure. The introduction of the Smart NIC, and years of data are allowing the cloud providers to run at extremely high rates of utilization which is causing network bandwidth and topologies to evolve.
There were several key takeaways from the OIF 100G workshop in Santa Fe. First, the Cloud providers are pushing all their suppliers to ship 56 Gbps SERDES today in high volumes and to quickly move towards 112 Gbps SERDES as quickly as possible. Cloud providers will move to 112 Gbps SERDES before 2021 if the industry can provide enough volume. Second, there are a number of different ways to get the industry there faster and at volume, including the use of gearboxes and retimers in order to use existing optics. What this means for the industry is that there is tremendous opportunity.
What was also interesting was the continued discussion of different port densities. It is possible to increase the density of a 1RU switch or a line card from 32 ports (25.6 Tb/s) to 36 ports (28.8 Tb/s). While there is some work to be done with certain length optics and power budgets, it is also promising that to increase the port density. It also can open the door for debate of what is a top-of-rack switch vs. aggregation or end-of-row switch. One could see some cloud providers choose the more traditional 48-port 100 Gbps switch with 400/800 Gbps uplinks instead of using a splitter cable. Also by moving the top-of-rack to the middle, we could see some unique deployments as we see 100 Gbps server connectivity. 100 Gbps switches can also make their way into the enterprise as an enterprise core/aggregation box and into traditional SPs, both of which will help drive additional port demand.
As we look into demand of 2020/2021 it is also important to remember the size of the cloud, especially the US Top 5 hyperscalers (Amazon, Apple, Facebook, Google, and Microsoft) which grew their DC equip0ment CAPEX in aggregated by 32% in 2017. It is likely that in three years (2020), there spend in networking will be nearly twice as much as it was in 2017. There is also potential, with optics pricing and increased use of DCI that the spend in networking can be even higher.