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Greg Ferro
Greg Ferro
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Innovation and Merchant Silicon: Not An Oxymoron

Merchant silicon can lead to a race to the bottom in price and quality for network gear, or spur new innovation. There's more evidence for the latter than the former.

The rise of merchant silicon in network switches and routers can have two potential outcomes. The first is a race to the bottom on price and quality.

Today, networking vendors enjoy large profit margins, and many manufacturers see a market that is ripe for flooding with low-cost and low-quality products. A 20% profit margin on a merchant silicon-based switch is a great return for a manufacturer used to the razor-thin margins on desktops and servers.

The other outcome is that merchant silicon frees up vendors to develop new features. Instead of funding a silicon development project that may take three to five years to come to market, networking vendors can work on cheaper SFP optics, better power supplies or more reliable code.

We may even see funding for next-generation features such as 40 GbE and 100 GbE, OpenFlow and OVSDB support, and wider support for newer protocols such as LISP.

One example of the second outcome is the Broadcom Trident2+ chip for Ethernet switches. The Broadcom Trident2+ has two key form factors: one with 32 x 40-GbE Ethernet ports presented as QSFP and the other with 48 x 10-GbE SFP with six 40-GbE QSFP ports. The Trident2 is shipping in multiple products including the Cisco Nexus 3100, the Dell S6000, the Nuage Networks VSG 7850, and the forthcoming S68 from Pluribus Networks.

[Cumulus Networks separates the network OS from switch hardware. Get insight into the potential impact of this strategy in "Cumulus Brings the Red Hat Model to Networking." ]

While all these vendors use the same chip, they bring distinct offerings to the market. Cisco emphasizes the OpenFlow compatibility of the Nexus 3100. The Dell S6000 operates at room temperature and is partnering with VMware NSX for VTEP support. Pluribus offers a low-latency switch with an open operating system based on OpenSolaris. Nuage Networks can now offer VTEP integration for its Virtualized Services Platform.

Low-Cost ECMP Networks

All of these products are well-suited to Equal Cost MultiPath (ECMP) Ethernet fabrics that use 1 RU switches to build large, high-performance Ethernet networks with a leaf/spine architecture.

Internal Architecture of Single Line Card Nexus 7000. Source: Cisco Systems
(click image for larger view)

There's a lot of Ethernet in a 32-port 40-GbE switch when customers stretch their budgets a little. A 40-GbE QSFP interface can break out to a 4 x 10-GbE interface with a suitable adapter. It can become a leaf switch with a configuration of 28 x 40-GbE ports with QSFP breakouts for 112 10-GbE ports for servers with 4 x 40-GbE reserved for uplinks, for a 7-to-1 uplink contention. Or consider a more practical mix of 24 x 40 GbE as 10 GbE with 8 x 40 GbE for uplinks, for a more practical 3-to-1 uplink contention.

I do believe we'll see the cost of network hardware go down, but not to the degree that a switch or a router becomes a commodity like a server.

That's because merchant silicon offers vendors to opportunity to bring new features to market quickly and with limited risk; if those features have value to customers, customers will pay a little more for them.

And even as hardware costs decrease, network spending will remain the same because customers will refresh their equipment more frequently.

The market is already stocked with cheap networking gear. If cheap is a winning strategy, why hasn't Netgear, D-Link or even Huawei achieved greater success in the last five years?

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User Rank: Apprentice
11/1/2013 | 8:01:08 PM
re: Innovation and Merchant Silicon: Not An Oxymoron
Great post Greg, I really enjoyed it. One thing to note is in the T2, there is a limitation that it can only support 104 internal mac addresses, thus you cannot practically breakout more than 96 10G Ports ... you could, but you would end up with unused capacity. You could breakout 100 10G ports and still be able to leverage 4 40G interfaces, but then you would have 3 unusable 40G ports. This is a chipset limitation and should affect all T2 platforms equally. So for these platforms you really should plan for 3:1 or else will have unused ports. While that sounds bad, its really not that different from putting 6 or 7:1 on a Trident or T+ ... you could breakout the 2 spare 40G interfaces into 10G, but most I have seen leave those idle and mark them as potential upgrade capacity if needed if running 6 or 7:1 OS ratio. I think this is a decent scenario, going 6:1 at the ToR can save a lot of money in spine costs and having a couple extra ports idle is a nice assurance as application patterns continue to change and with spine-leaf, it is always possible to add additional spine capacity as needed.
User Rank: Apprentice
10/15/2013 | 2:24:03 PM
re: Innovation and Merchant Silicon: Not An Oxymoron
The slightly dirtier take on merchant silicon is that these shops are increasingly acting more as outsourced resources than benevolent arms dealers.

As systems vendors look to differentiate, they still rely on capabilities in the silicon. These make their way onto product roadmaps via feature requests. And if you buy enough of the chips, your features get prioritized.

Big networking vendors will exploit roadmap influence to whatever extent possible. These new capabilities will require software to enable, and the vendors whose architectures and software support these features will certainly be in the best position to productize.

The upside is more capability. The downside is that even with off-the-shelf parts, you can quickly get into a lock-in state. Customers need to navigate through these waters carefully and deliberately.

-Mike Bushong
User Rank: Apprentice
10/11/2013 | 1:32:09 PM
re: Innovation and Merchant Silicon: Not An Oxymoron
Yes, we've seen this movie before with servers and we know how it ends. Either be low price or add value (or both, as Pluribus does) or see your market share shrink.

Thanks for mentioning our S68 product that will be based on the Broadcom Trident 2. Our current F64 product is based on the Intel Fulcrum Alta. One of our value adds is that we will work with all merchant silicon so our customers don't have to place a bet on a specific technology. More details here:
User Rank: Apprentice
10/11/2013 | 9:56:17 AM
re: Innovation and Merchant Silicon: Not An Oxymoron
I agree with the price premiums. But it's no longer enough to just make a switch or a router. It must be a product with genuinely useful features.
Drew Conry-Murray
Drew Conry-Murray,
User Rank: Strategist
10/10/2013 | 10:23:53 PM
re: Innovation and Merchant Silicon: Not An Oxymoron
I think network manufacturers are going to have a harder time justifying price premiums for hardware, but they can--and should--add value in software.
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