While Ethernet semiconductor vendors will continue to reap benefits from existing fast Ethernet (FE) and gigabit Ethernet (GE) product lines through 2012, a more attractive opportunity lies in the embedded Ethernet applications segment, particularly blade switching and storage networking, according to IDC. Companies serving these non-traditional application environments today will be well-positioned as 10GE becomes mainstream.

With a worldwide CAGR of 6.3% through 2011, this segment will encourage the long-awaited adoption of 10GE technology and provide additional, more robust revenue streams.

"Today, Ethernet semiconductor vendors have more growth opportunities as the number of potential applications for Ethernet technology grows," said Aileen Arcilla, senior analyst for IDC semiconductor program. "With the potential for lower capex and ongoing cost savings, Ethernet has emerged as a technology to support "nontraditional" applications in environments such as datacenters, storage area networks, and service provider networks. Semiconductor vendors that serve these segments will be well-positioned to gain market share once 10GE adoption becomes more prevalent."

Key trends of the Ethernet semiconductor market include:

• The transition from FE to GE will continue in the short term, and revenue opportunities exist particularly in the switch/PHY chipset segment.
• The widespread transition from GE to 10GE will occur in the latter half of the forecast.
• Niche applications, such as blade servers and storage, will encourage 10GE adoption into the wider Ethernet marketplace.

Companies such as Broadcom, Marvell, and Intel, which already lead the Ethernet semiconductor market (see IDC report, Worldwide Ethernet Semiconductor 2006 Vendor Shares), will face numerous opportunities to increase their market share as 10GE adoption ramps. Even companies that have not played traditionally in the Ethernet semiconductor market will have ample opportunity, should they provide solutions for Ethernet embedded applications.

About this study

IDC's study, Worldwide Ethernet Semiconductor 2007-2012 Forecast (IDC #208953), primarily examines all Ethernet ASSPs/ASICs shipping into networking markets. The study also covers Ethernet semiconductors shipping within other system markets that offer connectivity features. The study presents a top-line revenue forecast for application-specific semiconductor products, segmented by key end markets and by speed.

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