Switch Cost Breakdown: Bookmark This!

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In the cost structure of a network switch, chips constitute the largest portion. Mid-stream switch manufacturers typically adopt one of two approaches: developing their own custom chips or sourcing commercial chips from external suppliers.

The primary raw materials for switches include chips (Ethernet switch chips, CPUs, PHY), components, optical modules, PCB boards, and power supply modules. Among these, chips serve as the core component of network equipment, critically impacting product performance. Unsurprisingly, they also represent the highest cost share, accounting for approximately 32% of the total switch cost.

Currently, network equipment manufacturers primarily rely on two chip sourcing strategies:

• Companies like Cisco, Huawei, and Juniper possess the capability to design their own ASICs. They predominantly use these custom chips in their high-end products, while also utilizing commercial chips from external suppliers like Broadcom and Intel for certain product lines.

• Other manufacturers, such as Ruijie Networks, H3C, and Arista, primarily source and integrate commercial chips from leading external suppliers like Broadcom and Intel into their own switch products.