Overview:

Telecommunications network equipment sold to wireless network providers has always been a minor part of Samsung’s business, especially compared to memory chips and mobile phones – two sectors where it leads the world (also #1 in total semiconductor revenue and #1 or #2 silicon foundry vs TSMC).  Last year, Samsung held only a 6.6% share of the overall telecom equipment market, compared with Huawei’s 31%.  It ranked fifth in global sales of wireless base stations.

In fact,  the South Korean conglomerate’s information technology and mobile communications business declined 7% last year to $87 billion, of which an estimated $85 billion was mobile device sales and $2 billion was network infrastructure. SK Telecom is probably Samsung’s biggest customer for network gear. In the U.S., Samsung sells its 5G network equipment (base stations/small cells) to AT&T, Verizon and Sprint (Samsung is also a part of the Sprint Spark initiative).

Yet this year, Samsung is benefiting from a first-mover advantage in with South Korea deploying nationwide commercial (pre-standard) 5G networks in April and leading the world in 5G subscribers.  So the company’s initial 5G success story relies on its dominant positions in the South Korean and U.S. markets, where 5G services were launched earlier than in other regions.  RCR wireless said this past April that Samsung Electronics had sold 53,000 5G base stations to Korean carriers.

Samsung also hopes to capitalize on Huawei’s U.S. ban and U.S. government attempts to bar it from other countries 5G networks.  Yet despite Washington’s ban, the Chinese tech giant has so far won fifty (or more) 5G contracts from countries including Switzerland, the United Kingdom, Finland and even South Korea, according to a media report that quoted Ryan Ding, the president of Huawei’s Carrier Business Group.  Huawei is also extremely well positioned thanks to the launch of Chinese 5G services early this month.  It offers both price competitiveness and a technological edge, according to network operators that have tested Huawei’s gear.  It also is the holder of the largest number of telecommunications equipment patents.

Kim Young-ki, the head of Samsung Electronics’ network business division, said last June that Samsung would capture more than 20% of the global 5G equipment market by 2020. And since Kim’s statement, Samsung has made major inroads.  It now supplies 5G equipment to two of the three of the world’s first 5G service providers, SK Telecom and KT, both in South Korea, where (as noted above) nationwide 5G services began in April. Samsung also supplied the first 5G-enabled smartphones.

Beyond South Korea, Samsung provides 5G gear to AT&T, Verizon and Sprint in the U.S., which both run limited 5G services. Test supplies of Samsung 5G equipment have been provided to Telefonica of Germany, as well as AT&T and T-Mobile of the US.  However, Samsung declined to comment to Asia Times on how those tests are proceeding.

In October, Samsung won a contract to supply 5G mobile network equipment to KDDI, Japan’s second-largest telecommunications company. It did not reveal the details of the deal, but local media reports said the 5G equipment supplied by Samsung was expected to be worth US$2 billion over the next five years.

Also in October, Samsung showcased advanced LTE and 5G technologies used in combination in dual-connected mode networks with Reliance Jio Infocomm of India at the India Mobile Congress 2019. Experts say India is not ready to launch 5G services, but Samsung is keen to pave the way in cooperation with Jio.

“Samsung has been working in close cooperation with Jio to bring a digital transformation including transition to 4G throughout India for seven years,” Paul Kyungwhoon Cheun, Executive Vice-President and Head of Network Business at Samsung, said in a press release. “Samsung and Jio will continue to join forces in bringing next-generation innovation across the country, harnessing the full 5G potential in driving further growth of digital India.”

According to the Ministry of Science and ICT of Korea, Samsung took 36% of global sales of 5G network equipment in the first quarter of this year – the top position – followed by Ericsson and Huawei, both with 28%, and Nokia with 14%.  That improvement illustrates how far Samsung Electronics has come in the 5G market.

“Now, Samsung is posting a higher 5G equipment market share than its competitors as only a few countries, such as Korea and the US, have commercialized 5G service,” an unnamed industry expert told Asia Times. “We need to see how Samsung performs in the future … it is not likely to maintain its current position as more and more countries commercialize 5G services.”  The expert added that 5G services will be launched in about 50 countries next year, creating new battlegrounds for the sector’s players to fight on.

Samsung’s 5G Future:

Gaining early traction in major markets is crucial for wireless network equipment makers.  “Telecommunication service providers tend to keep their relations with existing suppliers once their network is set,” Kim Jong-ki of the Korea Institute for Industrial Economics and Trade told Asia Times. “It’s too early to speak of the future of Samsung’s 5G telecommunication business, but Samsung indeed has the potential to be a strong contender.

“Samsung’s participation in the world’s first commercialization of 5G network in Korea is a valuable asset for Samsung, and Samsung has R&D power and enough patents in the key area of 5G telecommunication – though its total number of patents does not match Huawei’s,” Kim added.

Pundits say that in addition to Samsung’s first-mover advantage, its position as an end-to-end 5G solution provider and its immunity to security concerns in the US are further strengths. Washington’s blacklisting of Huawei offers Samsung a particularly juicy opportunity to seize a major bridgehead in the world’s largest economy.

“Samsung’s telecommunications equipment business is expected to perform better in the 5G era [than in previous eras] as it took the initiative in the newly growing 5G market, as seen in its global market share in the first quarter of this year,” the expert said. “Now, Samsung’s position looks different from that in the 4G gear market.”

Moreover, there appears to be backing for aggressive moves into the sector at the very pinnacle of the electronics conglomerate – a critical factor in Korea’s family-dominated business groups.

“Samsung’s changed stance on the telecommunication equipment business is also expected to enhance competitiveness,” the expert added. “Lee Jae-yong, the heir of the Samsung business group, has shown a will to promote the business.”

Samsung states on its website:

While the IMT-2020 goals play a pivotal role in directing research and development, 5G networks will need to go far beyond numerical improvements in order to meet the requirements of evolving network usage that we are seeing today. Indeed, while 5G networks will enable the delivery of some very impressive services to the traditional mobile subscriber, dozens of previously unconnected industries are now incubating ideas that will completely transform the role of mobile telecommunications in today’s society.

In order to support these services, 5G radio access networks (5G RAN) will need to be flexible. They will need to be able to adapt to a wide range of different service requirements so that network and third party service providers alike can deploy new applications, services and devices seamlessly and sustainably. Through the evolution of the radio air interface, the implementation of ‘software-defined’ principles and more, the 5G RAN will enable transparent connectivity for a new generation of information-driven users and industries.

5G radio access deployments will be characterized by their highly dense, throughput focused and software-driven nature. Foremost among the differences between 5G and LTE will be the logical separation of each component of the 5G fNB (future NodeB). In particular, we will see the baseband split, with the lower layers of the 5G protocol stack merging with the radio unit to form a new element called the Access Unit (AU).

In an interview with an Ovum analyst, Samsung’s Dongsoo Park, PhD said:

“Having Korea as our home base affords us an incredible opportunity to commercialize the latest technology, which are reinforced by our current presence in the U.S., Japan, Europe, Southeast Asia, the Middle East and Russia. Our recent collaboration with Jio India further promotes Samsung’s firm commitment to the infrastructure business.”

We couldn’t agree more and are eager to see if Samsung can leverage that first mover advantage and potential Huawei blacklisting to gain share in the 5G network infrastructure market.

References:

https://www.asiatimes.com/2019/11/article/samsung-takes-on-huawei-in-race-for-5g-dominance/

https://www.rcrwireless.com/20190410/5g/samsung-electronics-supplies-53000-5g-base-stations-korean-carriers

https://www.samsung.com/global/business/networks/insights/5g-radio-access/