Ethernet switches

	The SW SW 2008-DP 10/100M Ethernet switch from Haoliyuan complies with IEEE 802.3.

Production of Gigabit Ethernet switches on the rise as makers match demand for high-performance networking equipment.

Suppliers of Ethernet switches in China are stepping up to Gigabit Ethernet technology in a bid to match the performance and transmission requirements of today’s networking environment. Output of Gigabit Ethernet switches has been rising since 2H08, and the line is projected to eventually push 10/100M models out of the mainstream in the next few years.

Of the 50 makers in the country, nearly 40 percent now develop Gigabit Ethernet switches. Most started shifting to this type as early as 2H06, but slow demand has kept production from climbing significantly. As the application range continues to expand, however, manufacturers said supply will increase accordingly. The growing number of enterprises migrating to Gigabit technology will also
fast-track adoption.

Gigabit Ethernet switches are now used in small offices, Internet bars, airports and public places. China makers offer mostly low-end and midrange models to quote competitive prices and boost sales. Many are sharpening their OEM capability to grab more projects.

In the Ethernet switch sector, a growing number of companies are expanding their midrange lineup and exploring the high end to improve market position. This year, suppliers estimate midrange models will increase their output share to 55 percent from 45 in 2008, with upscale versions taking up 5 percent.

Makers said the global financial crunch is creating opportunities for China-made devices as buyers look for alternative equipment providers offering lower prices. Many manufacturers in the country are therefore keen to leverage their cost advantage and grab a larger share of the market.

Suppliers such as MTN Electronic (Shenzhen) Co. Ltd are raising their output. The maker expects total production this year to rise by 10 percent and reach 1 million units. Nearly 65 percent will be for overseas buyers, up 5 percent from 2008. MTN aims to release new models with an enhanced price-performance ratio.

The continued dominance of international brands, however, presents a big challenge to manufacturers in China. Many are facing difficulty penetrating key destinations such as the US and Europe. Some are therefore establishing sales networks in Asia, Africa and the Middle East. In these areas, the main hurdle is the price, so companies tend to lower quotes. Several concentrate on the domestic front while slowly building their overseas channels.

	Shenzhen Kingnet offers the S1024GB Gigabit Ethernet switch.

China suppliers offer two main types of Ethernet switches: models targeted at enterprises and those for industrial applications. Most focus on the former, and fewer than 10 carry industrial-use versions.

Small and midsize companies provide both types for the low-end and midrange sectors, but the majority will be concentrating on enterprise-centric Ethernet switches. Large makers offer the entire product spectrum to reach
a wider client base.

Industrial Ethernet switches are typically designed for big systems and equipment. Because of the limited application range, few companies are eager to pursue this type. The high technology threshold is also discouraging newcomers.

In the enterprise Ethernet switch segment, models supporting 10/100M belong to the low end. Units delivering Gigabit Ethernet are categorized as midrange, and those capable of 10 Gigabit Ethernet are upscale. About half of the suppliers offer 100M Ethernet switches. Thirty percent carries 10/100M and Gigabit models, and 20 percent makes Gigabit and 10 Gigabit Ethernet switches.

Companies concentrating on low-end products said they have no plans of developing new models, and will focus instead on boosting their customization capability. Haoliyuan (Shenzhen) Electronic Co. Ltd, which started releasing Ethernet switches in 2004, can provide Gigabit models, but low demand for such units has prompted the maker to emphasize entry-level versions. Its priority this year will be 100M switches, with about 50 percent of output targeted at Asia.

Most suppliers’ selections consist of websmart, unmanaged and managed switches. They expect unmanaged models to continue dominating exports, but see demand for the other two types rising significantly in the months ahead. In anticipation, companies such as MTN will boost the features and functions of websmart and managed Ethernet switches. The supplier will release 10/100M and Gigabit units, with plans on the way to bolster R&D on Gigabit products.

Unmanaged Ethernet switches from China have eight, 16, 24 and 48 ports, with the first two types leading the mainstream. The ports support auto-MDI/MDIX and can work as an uplink or common interface. Such designs provide a cost-effective, high-performance and nondisruptive evolution into Gigabit solutions. Most models feature 10/100/1000Mbps auto-negotiation through an RJ-45 interface.

	The ES228 Gigabit Ethernet switch from MTN TN Electronic supports IEEE 802.3x flow control.

Suppliers of Gigabit Ethernet switches are emphasizing enhanced performance in their R&D projects. Many have no immediate plans to integrate new features and functions as these just increase the price and risk competitiveness.

Shenzhen Kingnet Technology Co. Ltd makes 10/100M Ethernet and Gigabit Ethernet switches. This year, the company will increase its output of the latter, which will consist mainly of dumb versions for offices. Exports go to the Middle East and Africa.

Few manufacturers are pursuing 10 Gigabit Ethernet switches due to low demand. The product’s adoption is also hindered by the high manufacturing cost and price.

Even major players such as Huawei and ZTE said it will take at least two more years before suppliers start cultivating this line.

Companies offering 10 Gigabit Ethernet switches carry only one model. Output will not likely increase substantially this year.

Currently, 10 Gigabit Ethernet switches from China cater to the low-end and midrange markets. These are generally L3 congestion-less models capable of multilayer switching and wire-speed router forwarding.

Quickte Technology Co. Ltd, one of few 10 Gigabit Ethernet equipment suppliers in the country, plans to release two units in 2H09. The products will incorporate enhanced full- and half-duplex traffic control, IP multicast and QoS support.

Next year, the maker will concentrate on 10 Gigabit Ethernet switches for large offices, although it will also develop industrial-grade versions to broaden the selection. Quickte projects output will reach 20,000 units.

Regardless of product type, chipsets play a crucial role in the performance and price of an Ethernet switch. They account for 20 to 35 percent of the total cost.

Makers’ choice of IC is based on power consumption, transmission speed and compatibility with existing equipment. The majority of suppliers use solutions from Vitesse, Marvell, Broadcom and Realtek.

Many adopt Realtek and Vitesse chipsets for 10/100M Ethernet switches because of their mature technology and lower cost.

Solutions from Broadcom, Marvell and Atheros are favored for Gigabit and 10 Gigabit Ethernet models. Fifty percent of products in these categories are based on ICs from Broadcom, and 30 percent use Marvell chipsets.

Makers said prices of 10/100M Ethernet switches reached rock-bottom levels in 1Q09, so no further reductions are likely this year. Quotes for Gigabit Ethernet models will decrease by 5 to 10 percent in coming months. Those for 10 Gigabit Ethernet units will experience a 10 to 15 percent decline.

Shenzhen in Guangdong province is the main manufacturing center for Ethernet switches in China. Being a major hub for consumer electronics, the city has a supply chain that makers of networking equipment leverage to sharpen competitive edge.

The area’s material and component providers include local and foreign-owned companies. The rich selection allows manufacturers to mix and match solutions depending on buyers’ cost considerations and requirements.

Shenzhen’s transportation system facilitates product shipment. The city’s closeness to Hong Kong and other key cities in Guangdong helps makers source components.

Suppliers conduct assembly and packaging. They implement 100 percent QC on midrange and upscale units, and random sampling for low-end models. Many complement vibration, drop and temperature checks with switching speed, packet loss rate, data transmission and throughput tests.

Hong Kong’s Ethernet switch market has been declining in recent years due to slow demand. The supplier pool has shrunk to 15, and only a few are active in product development and marketing. Most expect the recent economic challenges to push down sales further.

Makers see, however, slight growth in the 10 Gigabit Ethernet line. The upturn will be driven by the rising number of enterprises worldwide migrating their networks from Gigabit Ethernet technology.

One major hurdle is the dominance of international brands such as Cisco and Juniper, which will block Hong Kong suppliers’ penetration of key overseas markets. This has, in fact, kept makers from increasing their investment in R&D. Many continue to focus on low-end products where they can compete on price.

Under efforts to broaden their reach, however, some are putting more emphasis on DSL modems and wireless routers that integrate the Ethernet switch function. The strategy also allows these companies to pursue telecom operators and widen their client base. Several promote their own brands, and others concentrate on OEM and ODM projects.

The majority of switches from Hong Kong are targeted at entry-level residential, SOHO and small enterprise applications.

Companies emphasize simplicity, reliability and low price in designing products. Some offer 10/100/1000Mbps switches with up to 24 ports.

Aztech Systems (H.K.) Ltd is one of the few Hong Kong makers capable of supplying their own brand of Ethernet switches or developing customized models for OEM and ODM clients. The manufacturer’s entry-level units include a 5 and an 8-port version, both of which support 10/100Mbps auto-negotiation, auto-MDI/MDIX, store-and-forward technology for eliminating bad packets, and plug-and-play installation.

For SOHO users, Aztech offers a 16-port 10/100Mbps switch with a 13in rack-mountable steel case. The company also develops ADSL2/2+ and VDSL2 modems, residential gateways and wireless routers, all with a built-in switch function.