What is Difference Between Hardware and Software Switching

If I summarize the answer of this question in one line then I would say Hardware Switching is performed by ASICs and Software Switching is performed by CPUs. But let’s have some explanation of both to clearly understand the difference.
The term hardware-switching refers to the act of processing packets at any Layers 2 through 7, via specialized hardware components referred to as Application-Specific Integrated Circuits (ASIC). ASICs can generally reach throughput at wire speed without performance degradation for advanced features such as QoS marking, ACL processing, or IP rewriting.
Other terms used to describe hardware-switching are in-hardware, using ASICs, and hardware-based.
Multilayer switching (MLS) is another term commonly used to describe hardware-switching.  MLS describes the capability to route and switch frames at line-rate (the speed of all ports sending traffic at the same time, full-duplex, at the maximum speed of the interface) with advanced features such as Network Address Translation (NAT), QoS, access controls, and so on using ASICs.

Switching and routing traffic via hardware-switching is considerably faster than the traditional software-switching of frames via a CPU. Many ASICs, especially ASICs for Layer 3 routing, use specialized memory referred to as ternary content addressable memory (TCAM) along with packet-matching algorithms to achieve high performance, whereas CPUs simply use higher processing rates to achieve greater degrees of performance. Generally, ASICs can achieve higher performance and availability than CPUs.
In addition, ASICs scale easily in switching architecture, whereas CPUs do not. ASICs integrate not only on Supervisor Engines, but also on individual line modules of Catalyst switches to hardware-switch packets in a distributed manner.
ASICs do have memory limitations. For example, the Catalyst 6500 family of switches can accommodate ACLs with a larger number of entries compared to the Catalyst 3560E family of switches due to the larger ASIC memory on the Catalyst 6500 family of switches. Generally, the size of the ASIC memory is relative to the cost and application of the switch. Furthermore, ASICs do not support all the features of the traditional Cisco IOS. For instance, the Catalyst 6500 family of switches with a Supervisor Engine 720 and an MSFC3 (Multilayer Switch Feature Card) must software-switch all packets requiring Network Address Translation (NAT) without the use of specialized line modules. As products continue to evolve and memory becomes cheaper, ASICs gain additional memory and feature support.

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