Data Processing Unit (DPU) and SmartNIC vendors such as NVIDIA, Intel, and AMD are making a lot of noise about the ability of their adapters to offload work from CPUs and to run networking, security, and storage applications directly on a NIC inside a server. But that noise hasn’t necessarily turned into sales—at least not yet.
Market data collected by Dell’Oro Group says that the SmartNIC market, which includes DPUs, accounts for less than a quarter of overall revenues in Ethernet Adapters: less than $1 billion out of a $4.4 billion market. However, Dell’Oro forecasts that SmartNIC revenue will grow by 30% in 2023. By contrast, traditional NIC revenue will only see single-digit growth.
One reason for the anticipated uptick in SmartNIC adoption is VMware’s Project Monterey, said Baron Fung, Research Director at Dell’Oro. Project Monterey offers an enterprise-friendly software layer, using vSphere, that can support third-party applications. It also provides familiar management and operations tools to enterprise IT.
“We think there will be more traction for SmartNICs with Project Monterey, which will let enterprise customers deploy SmartNICs with less development,” said Fung in an interview.
Another factor for SmartNICs is the interest in edge deployments, where organizations such as large enterprises and telcos want to push compute and networking closer to the physical locations where data is being generated. “There’s synergy between SmartNICs and edge,” said Fung. “Edge deployments are more application and use-cases specific. SmartNICs will be useful to customize machines for those use cases.”
Some locations may also have constraints around power and space. SmartNICs can help consolidate space by running, for example, a virtual switch, router, or firewall directly on NIC inside the server instead of having to deploy a separate physical box.
2022: A Good Year For Ethernet Adapters
While 2023 may be promising for DPUs, 2022 was a very good year for the Ethernet Adapter market overall. Dell’Oro says revenues grew 40% in 2022 vs. the previous year, though not because many more units were shipped.
Instead, revenue growth came from increased prices. Price increases were driven partly by higher supply chain costs, which were passed on to customers. But Dell’Oro also notes that buyers are shifting to higher, more expensive port speeds in hyperscale and enterprise markets, which also accounts for the revenue jump.
Hyperscalers are buying more 100G and 200G ports. In the enterprise, there’s strong momentum for 25G.
“Even though prices are going up, the average selling price per gigabit is going down because all the bandwidth can be utilizied,” said Fung. “So even though the absolute cost is going up, the relative cost is going down.”
Breaking out the market by ports, Dell’Oro breaks down the 2022 markety thusly:
If you’re wondering where 400G is on this list, Fung says it’s still very limited at this point.
Looking Ahead
For 2023, Fung doesn’t expect another massive revenue gain for Ethernet adapters. One reason is that component stocks are being replenished and vendors are carrying more inventory. He anticipates prices will still go up, but at a slower rate. “Prices are sticky,” he said. “They don’t come down immediately even if input costs start to go down.”
