Ethernet controller and adapter revenue is on track to grow 27% in 2021 as major cloud service providers upgrade their data center networks. However, the adapter shipments slipped 7% year over year in the third quarter amid supply constraints, a recent Dell’Oro Group report found.

Component shortages stalled Ethernet adapter shipments “with lead-times extending beyond 52 weeks in some extreme cases,” Baron Fung, Dell’Oro Group research director, said in a statement.

As supply restrictions ease and smartNIC adoption grows, Fung expects adapter shipments will return to double-digit growth in the new year.

Adapters have hundreds of board-level components that may be subject to longer delays. Conversely controllers have fewer components that are higher up in the supply chain, resulting in shorter delays, Fung explained in an email to SDxCentral.

Ethernet controller shipments approached a new high in the third quarter as vendors stockpiled controllers in anticipation of stronger cloud and enterprise demand, Fung said.

In the adapter market, the top three vendors are Nvidia, Intel, and Broadcom. Nvidia overtook Intel in 2021 on the strength of its high-speed network adapters, according to Fung.

“Intel was late to the market with these higher-speed adapters, and are catching up with new recent product launches,” like its 800 series adapters, he added.

Cloud providers drove demand for these high-speed adapters, and thanks to the high volumes of parts required, they haven't been shy about developing their own products, Fung said.

“The hyperscale cloud service providers have been developing Ethernet adapters internally for their own data centers. This makes sense because the cloud service providers can produce custom equipment [and also chips] that are optimized for their own data centers,” Fung wrote.

This trend may result in original equipment manufacturers losing marketshare over time, he added.

In addition to driving higher-speed networking, cloud service providers also led in smartNIC — often called data processing units (DPUs) — usage. Amazon and Microsoft are both using internally-developed smartNICs in their data centers, which account for the majority of the shipments, the report found. 

Looking ahead, Dell'Oro forcasts smartNICs revenues will grow 55% in 2022.

However, “outside of the hyperscale cloud service providers, the smartNIC market is still in its early stages,” Fung said, as customers explore viable use cases for them in their data centers.

Most adapter vendors today either offer smartNICs or are sampling them. Besides cloud providers, smartNIC venders include Marvell, Intel, Xilinx, Nvidia, Napatech, Pensando, Fungible, Ethernity, and Broadcom. Most of them “are trying to grow their smartNIC share in the tier two cloud, enterprise, and telco segments,” Fung said.