Network Processors Building Momentum to Revolutionize The Networking Equipment Industry, IDC Says

FRAMINGHAM, MA – JULY 6, 2000 – Network processors (NPUs) are on the verge of forever changing the networking equipment industry. IDC forecasts that these devices will eventually displace other networking semiconductor components and in the process increase their revenues from less than $41 million in 1999 to over $560 million by 2003.

"Network processors will dramatically change the value chain and outlook of the whole networking equipment industry within the next decade," said Sean Lavey, senior analyst with IDC's Semiconductors research program. "Mainstream network processor adoption will have far-reaching effects in not only the wired networking systems space but also the faster-growing wireless communications arena. Wherever voice, data, and video applications are being integrated together over a network infrastructure, there will be an opportunity for network processor technology to perform the datapath functions needed to ensure high levels of bandwidth performance and quality of service reliability."

The overall market for network processing semiconductors, which includes ASICs/ASSPs, general-purpose microprocessors, and NPUs, will increase from $1.5 billion in 1999 to $3.3 billion in 2003. Throughout the forecast, ASICs/ASSPs will still hold onto the largest portion. "Heavy continued usage of OEM intellectual property within ASICs for certain equipment segments will keep network processors from achieving the leading revenue position by 2003," Lavey said. "However, we believe this will be a temporary situation. In the end, for most networking OEMs, the question won't be if they should use a programmable NPU device, but when they should use one."

IDC believes the NPU segment will grow significantly faster than the other segments in the network processing semiconductor market. Its compound annual growth rate will be a torrid 93.1%, compared with 21.1% for the overall market.

For vendors competing in this market, IDC cautions that offering a strong NPU device will not be enough to guarantee success. Other factors such as a feature-rich and easy-to-use software development environment, a broad portfolio of complementary components to connect to, access to engineering support resources, strategic partnerships, and a track record of success working in the networking market will also be important.

IDC's new report, Network Processor Update: Consolidation Changes Competitive Landscape analyzes the network processor market. The report begins with a review and definition of what a network processor is and what activities it plans to perform. Next, the report looks at the target market for these devices and forecasts its revenue opportunity through 2003 by application segment. A forecast of the entire network processing semiconductor market segmented by ASICs/ASSPs, general-purpose microprocessors, and NPUs is also included. The report also examines the market's competitive landscape and the highlights the different types of vendors competing in the market. It also provides details on each vendor's design wins to date. The report ends with a discussion of trends that will impact the market in the years to come. To purchase the reports, contact Patrick Steeves at 1-800-343-4952, ext. 6787 or at psteeves@idc.com.

About IDC

IDC delivers dependable, relevant, and high-impact data and insight on information technology to help organizations make sound business and technology decisions. IDC forecasts worldwide IT markets and technology trends and analyzes IT products and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC is committed to providing global research with local content through more than 500 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, and the financial community. Additional information can be found at http://www.idc.com.

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