Global telecom infrastructure market outlook after a dismal 2024
Despite the telecom industry’s hopes that 2025 will usher in a turnaround for the global network equipment market, there’s no hint of that happening considering how bad 2024 was.
According to Dell’Oro Group, worldwide telecom equipment market revenues in 2024 dropped 11% year-over-year – marking “the steepest annual decline in more than 20 years.”
Dell’Oro VP Stefan Pongratz wrote:
“Preliminary findings suggest that worldwide telecom equipment revenues across the six telecom programs tracked at Dell’Oro Group—Broadband Access, Microwave & Optical Transport, Mobile Core Network (MCN), Radio Access Network (RAN), and SP Router & Switch—declined 11% year-over-year (YoY) in 2024, recording the steepest annual decline in more than 20 years (decline was >20% in 2002), propelling total equipment revenue to fall by 14% over the past two years. This remarkable output deceleration was broad-based across the telecom segments and driven by multiple factors, including excess inventory, challenging macro environment, and difficult 5G comparisons.
In 4Q24, stabilization was driven by growth in North America and EMEA, which nearly offset constrained demand in Asia Pacific (including China).
The full-year decline was uneven across the six telecom programs. Optical Transport, SP Routers, and RAN saw double-digit contractions, collectively shrinking by 14% in 2024. Microwave Transport and MCN experienced a more moderate combined decline in the low single digits, while Broadband Access revenues were fairly stable.
Similarly, regional developments were mixed in 2024. While the slowdown was felt across the five regions — North America, EMEA, Asia Pacific, China, and CALA — the deceleration was more pronounced in the broader Asia Pacific region, reflecting challenging conditions in China and Asia Pacific outside of China.
Supplier rankings were mostly unchanged globally, while revenue shares shifted slightly as both Huawei and Ericsson positions improved. Overall market concentration was stable with the 8 suppliers comprising around ~80% of the worldwide market in 2024.
Rankings changed outside of China. Initial estimates suggest Huawei passed Nokia to become the #1 supplier, followed by Nokia and Ericsson. Huawei’s revenue share outside of China was up 2 to 3 percentage points in 2024, relative to 2021, while Ericsson is down roughly two percentage points over the same period/region.
A glimmer of hope is that the Covid instigated inventory correction is over and the supply chain is starting to recover. For example, Ciena recently noted its problems with “inventory digestion” are mostly over. CEO Gary Smith said that customers are again investing in scaling their networks, specifically for the anticipated increase in cloud traffic and new AI workloads, including Managed Optical Fiber Networks opportunities with the cloud providers.
However, that might take time to play out. Vendors may have to take at least 6-12 months to retool their supply chains due to tariffs, AvidThink Principal Roy Chua has said. And given the “will-they, won’t-they” situation going on with the tariffs, their ultimate impact remains to be seen.
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It’s been six years since 5G networks have been commercially deployed. But aside from deploying fixed wireless access (FWA), telcos have struggled to “find large use cases that require 5G speeds and features,” Deloitte said in its latest telecom industry forecast.
“Not only were there seemingly few additional use cases driving 5G adoption and monetization in 2024, but there may not be many more for 2025 or even 2026 either.” The market research/accounting firm continued:
Our outlook focuses on three of those difficult choices, and we have a full chapter on each:
- In 2025, the most discussed source of growth for many industries is generative AI, and telcos are asking how they can share in that excitement. Telcos are using gen AI to reduce costs, become more efficient, and offer new services. Some are building new gen AI data centers to sell training and inference to others. A gen AI gold rush expected over the next five years. Spending estimates range from hundreds of billions to over a trillion dollars on the physical layer required for gen AI: chips, data centers, electricity. Close to another hundred billion US dollars will likely be spent on the software and services layer.
- At the same time, telcos are roughly at the midpoint between the launch of 5G and the expected launch of 6G, and they want to confirm that they can shape 6G to be more profitable than 5G has so far been.
- Finally, after years of divesting noncore assets, telcos are getting primed to deploy M&A strategies in pursuit of growth.
Globally, the telecommunications industry is expected to have revenues of about US$1.53 trillion in 2024, up about 3% over the prior year. Both in 2024 and out to 2028, growth is expected to be higher in Asia Pacific and Europe, Middle East, and Africa, with growth in the Americas being around 1% annually. All three regions are expected to surpass half a trillion dollars in revenue each by 2027. By market cap, the sector is about US$2.6 trillion globally (Figure 1, below).
Stefan summed up: “Market conditions are expected to stabilize in 2025 on an aggregated basis, though it will still be a challenging year. The analyst team is collectively forecasting global telecom equipment revenues across the six programs to stay flat.”
References:
https://www.fierce-network.com/broadband/global-telecom-infra-faced-ultimate-pitfall-2024
Telco spending on RAN infrastructure continues to decline as does mobile traffic growth
Dell’Oro: Global RAN Market to Drop 21% between 2021 and 2029
Dell’Oro: Global telecom CAPEX declined 10% YoY in 1st half of 2024
Dell’Oro: Private RAN revenue declines slightly, but still doing relatively better than public RAN and WLAN markets
Dell’Oro: RAN market still declining with Huawei, Ericsson, Nokia, ZTE and Samsung top vendors
Dell’Oro: 4G and 5G FWA revenue grew 7% in 2024; MRFR: FWA worth $182.27B by 2032
Highlights of Dell’Oro’s 5-year RAN forecast
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“It is not easy to put a positive spin on the fact that the RAN market just recorded the steepest full-year decline in more than 20 years,” said Stefan Pongratz, Vice President for RAN market research at the Dell’Oro Group. “Regional coverage imbalances and monetization challenges are nothing new. What sets this downturn apart is the uncertainty surrounding the capacity upgrade cycle that typically comprises a significant part of the RAN market in the new technology post-peak rollout phase,” continued Pongratz.
Additional highlights from the 4Q 2024 RAN report:
Revenue rankings did not change in 2024. The top 5 RAN suppliers based on worldwide revenues are Huawei, Ericsson, Nokia, ZTE, and Samsung.
The top 5 RAN suppliers based on revenues outside of China are Ericsson, Nokia, Huawei, Samsung, and ZTE.
Revenue shares changed in 2024 – Huawei and Ericsson improved their revenue shares while Nokia, Samsung, and ZTE’s RAN revenue shares fell.
The fundamentals that shape the RAN market have not changed, and the long-term trajectory discussed in the most recent 5-year forecast still holds (0 percent CAGR over next five years).
The short-term outlook is mostly unchanged, with total RAN expected to remain stable in 2025 and RAN outside of China growing at a modest pace as conditions in North America and APAC excluding China improve.
https://www.delloro.com/news/ran-down-9-billion/