RAN
Dell’Oro: 2023 global telecom equipment revenues declined 5% YoY; Huawei increases its #1 position
Preliminary Dell’Oro Group data found that worldwide telecom equipment revenues across the six telecom programs tracked – Broadband Access, Microwave & Optical Transport, Mobile Core Network (MCN), Radio Access Network (RAN), and SP Router & Switch – declined 5% year-over-year (YoY) for the full year 2023, performing worse than expected. First and foremost, challenging comparisons in some of the advanced 5G markets with higher 5G population coverage taken together with the slow transition towards 5G SA helped to partially explain steep declines in wireless-based investments. This capex deceleration was not confined to the RAN and MCN segments. Following a couple of years of robust PON investments, operators were able to curtail their home broadband capex as well. This reduction was more than enough to offset positive developments with optical transport and Service Provider routers.
The North America telecom equipment market declined faster than expected. Initial readings show that the aggregate telecom equipment market dropped by roughly a fifth in the North America region, underpinned by weak activity in both RAN and Broadband Access. On the bright side, regional dynamics were more favorable outside of the US. Our assessment is that worldwide revenues excluding North America advanced in 2023, as positive developments in the Asia Pacific region were mostly sufficient to offset weaker growth across Europe.
Also contributing to the regional and technology trends is the disruption caused by Covid hoarding and the supply chain crisis. Although this inventory correction was not felt everywhere and varied across the telecom segments, it was more notable in the RAN this past year.
Renewed concerns about macroeconomic conditions, Forex, and higher borrowing costs are also weighing down prospects for growth. The gains in the USD against the Yuan and the Yen are impacting USD-based equipment revenue estimates in China and Japan.
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Dell’Oro says that Huawei maintained its lead as the top global telecom equipment company by revenue in 2023, despite efforts by the U.S. government and other countries to limit its addressable market and access to Android and the latest chips and semiconductor technology from TSMC. In fact, Dell’Oro’s assessment is that Huawei’s lead widened in 2023, in part because its limited exposure to the North America region was a benefit in 2023 on a relative basis.
Supplier rankings were mostly unchanged. However, vendor revenue shares shifted slightly in 2023. Still, the overall concentration has not changed – the top seven suppliers accounted for around 80% of the overall market.
Market conditions are expected to remain challenging in 2024, though the decline is projected to be less severe than in 2023. The analyst team is collectively forecasting global telecom equipment revenues to contract 0 to -5% in 2024. Risks are broadly balanced. In addition to currency fluctuations, economic uncertainty, and inventory normalization, there are multiple regions/technology segments that are operating in a non-steady state.
References:
Dell’Oro & Omdia: Global RAN market declined in 2023 and again in 2024
Dell’Oro: Broadband access equipment sales to increase in 2025 led by XGS-PON deployments
Global 5G Market Snapshot; Dell’Oro and GSA Updates on 5G SA networks and devices
Dell’Oro: Broadband network equipment spending to drop again in 2024 to ~$16.5 B
Dell’Oro: Mobile Core Network market has lowest growth rate since 4Q 2017
Dell’Oro: U.S. suppliers ~20% of global telecom equipment market; struggling in RAN business
Dell’Oro & Omdia: Global RAN market declined in 2023 and again in 2024
A new report from the Dell’Oro Group reveals that the global Radio Access Network (RAN) market concluded the year with another difficult quarter, resulting in a global decrease of nearly $4 billion in RAN revenues for the full year of 2023. However, despite these challenges, the results for the quarter exceeded expectations, partly due to robust 5G deployments in China.
“Following the intense rise between 2017 and 2021, it’s clear that the broader RAN market is now experiencing a setback, as two out of the six tracked regions are facing notable declines,” said Stefan Pongratz, Vice President for RAN market research at the Dell’Oro Group. “In addition to challenging conditions in North America and Europe, the narrowing gap between advanced and less advanced operators (e.g. India) in this first 5G wave, compared to previous technology cycles, initially had a positive impact but is now constraining global 5G and broader RAN growth prospects,” Pongratz added.
Additional highlights from the 4Q 2023 RAN report:
- Overall concentration in the RAN market showed signs of improvement in 2021 and 2022, but this progress slowed down in 2023.
- While full-year RAN rankings remained mostly unchanged for major suppliers, revenue shares within the RAN market showed more variability, with Huawei and ZTE enhancing their global revenue shares. Similarly, Huawei and Nokia saw improvements in their revenue shares outside of China.
- The top 5 RAN suppliers based on worldwide revenues are Huawei, Ericsson, Nokia, ZTE, and Samsung.
- Regional projections are mostly unchanged, with market conditions expected to remain tough in 2024 due to difficult comparisons in India. Nevertheless, the base-case scenario anticipates a more moderate pace of decline this year.
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Source: Dell’Oro Group
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Separately, Rémy Pascal of Omdia says that global RAN revenues (including both hardware and software) declined by 11% last year to just over $40 billion. The worst performing region by far was North America, which almost halved, but this should be viewed in the context of a relatively strong 2022.
India and China were been the best performing countries for new RAN deployments. This partly explains why Huawei continues to be the top RAN vendor despite attempts by the U.S. and its allies to prevent that, but as the Omdia table below shows, the Chinese vendor is still doing well in many other regions too. We’re told this table looked pretty much the same last year.
Top RAN vendors by region, full year 2023:
|
North America |
Asia & Oceania |
Europe, Middle East and Africa |
Latin America & the Caribbean |
|
Ericsson |
Huawei |
Ericsson |
Huawei |
|
Nokia |
ZTE |
Nokia |
Ericsson |
|
Samsung |
Ericsson |
Huawei |
Nokia |
Source: Omdia
Omdia expects the RAN market size to decrease by around 5% compared to 2023. That’s an improvement on the 11% 2022-23 decline but still not good news for the RAN industry.
For all the talk of Open RAN, it clearly has yet to inspire significant capex from operators. The same goes for private 5G or programmable networks. Less than halfway through the presumed 5G cycle, spending has stalled and it’s not at all clear what will restart it.
Dell’Oro Group’s RAN Quarterly Report offers a complete overview of the RAN industry, with tables covering manufacturers’ and market revenue for multiple RAN segments including 5G NR Sub-7 GHz, 5G NR mmWave, LTE, macro base stations and radios, small cells, Massive MIMO, Open RAN, and vRAN. The report also tracks the RAN market by region and includes a four-quarter outlook. To purchase this report, please contact us by email at [email protected].
References:
RAN Market Shows Faint Signals of Life in 4Q 2023, According to Dell’Oro Group
https://www.telecoms.com/wireless-networking/global-ran-market-declined-by-11-in-2023
Dell’Oro: RAN market declines at very fast pace while Mobile Core Network returns to growth in Q2-2023
Dell’Oro: RAN Market to Decline 1% CAGR; Mobile Core Network growth reduced to 1% CAGR
https://www.silverliningsinfo.com/5g/ericsson-nokia-and-state-global-ran-2024
LightCounting: Open RAN/vRAN market is pausing and regrouping
Dell’Oro: RAN revenues declined sharply in 2023 and will remain challenging in 2024; top 8 RAN vendors own the market
According to a new report by Dell’Oro Group, the Radio Access Network (RAN) market is now in a downward trajectory. That’s no surprise to readers of the IEEE Techblog, as we forecasted the “5G train wreck” many years ago and continued the drumbeat due to the scarcity of 5G SA core networks, without which there are NO 5G features/functions. Also that URLLC performance requirements were not met by either the 3GPP Release 16 Enhancements for URLLC in the RAN spec or the ITU M.2150 recommendation which is the official standard for 5G NR.
Following the >40 percent ascent between 2017 and 2021, RAN revenues stabilized in 2022, and are on target to decline sharply in 2023. Market conditions are expected to remain challenging in 2024 as the Indian RAN market pulls back, though the pace of the global decline this year and for the remainder of the forecast period should be more moderate.
“The big picture has not changed. MBB-based investments are now slowing and the upside with new growth areas including FWA and private wireless is still too small to change the trajectory,” said Stefan Pongratz, Vice President at Dell’Oro Group. “Also weighing on the MBB market is the fact that the upper mid-band capacity boost is rather significant relative to current data traffic growth rates in some markets, which could impact the timing for capacity upgrades,” continued Pongratz.
Additional highlights from the Mobile RAN 5-Year January 2024 Forecast Report:
- Worldwide RAN revenues are projected to decline at a 1 percent CAGR over the next five years.
- The Asia Pacific region is expected to lead the decline, while easier comparisons following steep contractions in 2023 will improve the growth prospects in the North America region.
- 5G-Advanced is expected to play an important role in the broader 5G journey, however, it is not expected to fuel another major capex growth cycle.
- RAN segments that are expected to grow over the next five years include: 5G NR, FWA, mmWave, Massive MIMO, Open RAN, private wireless, small cells, and Virtualized RAN.
Dell’Oro said in November said it was optimistic about the long-term growth prospects of the RAN space, but simultaneously noted that after a peak in 2021, RAN revenues will track downwards until the second half of the current decade; overall it predicted a 1% compound annual growth rate between 2020 and 2030. That forecast will now have to be revised DOWN significantly as 6G- the next big RAN mover- won’t be standardized till 2031 at the earliest.
RAN remains a concentrated market, with the top 8 RAN suppliers accounting for more than 98% of the 1Q23-3Q23 RAN market. New technologies, architectures, and segments can in some cases present opportunities for vendors with smaller footprints. Still, the track record for new entrants is far from perfect.
Dell’Oro Group’s Mobile RAN 5-Year Forecast Report offers a complete overview of the RAN market by region – North America, Europe, Middle East & Africa, Asia Pacific, China, and Caribbean & Latin America, with tables covering manufacturers’ revenue and unit shipments for 5GNR, 5G NR Sub 7 GHz, 5G NR mmW and LTE pico, micro, and macro base stations. The report also covers Open RAN, Virtualized RAN, small cells, and Massive MIMO. To purchase this report, please contact us by email at [email protected].
References:
RAN Decline to Extend Beyond 2023, According to Dell’Oro Group
https://techblog.comsoc.org/2024/01/18/where-have-you-gone-5g-midband-spectrum-fwa-decline-in-capex-and-ran-revenue-in-2024/
Dell’Oro: RAN market declines at very fast pace while Mobile Core Network returns to growth in Q2-2023
Dell’Oro: OpenRAN revenue forecast revised down through 2027
Dell’Oro: U.S. suppliers ~20% of global telecom equipment market; struggling in RAN business
Dell’Oro: Private 5G ecosystem is evolving; vRAN gaining momentum; skepticism increasing
https://www.sdxcentral.com/articles/contributed/what-to-expect-from-ran-in-2024/2024/01/
LightCounting & TÉRAL RESEARCH: India RAN market is buoyant with 5G rolling out at a fast pace
The India Wireless Infrastructure Report provides an update on the 5G radio access (RAN) developments in India, including geopolitics trends and technology. The report says that The RAN market in India is buoyant with a swelling local ecosystem that boasts big international ambitions.
Reliance Jio is rolling out 5G at a fast pace, followed by Bharti Airtel. As a result,1H23 RAN sales surged 300% YoY, and kept Ericsson in the driver’s seat, followed by Nokia and Samsung. Although the rollout pace has slowed down, 2023 is looking up, looks like the peak year, and we expect RAN equipment sales to more than double compared to last year, still driven by Jio and Airtel while BSNL will contribute with its 4G deployment.
“It’s a two-horse race, the near Jio / Airtel duopoly is quickly blanketing the country with 5G while the rest are struggling and catching up with 4G.” said Stéphane Téral, Chief Analyst at LightCounting Market Research and Founder of TÉRAL RESEARCH.
Source: LightCounting
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- 2024 is shaping up as a shift year from 5G network buildout to how to foster utilization and some midband FWA experiments.
- Due to the looming formation of a CSP duopoly, the looming merger of MTNL into BSNL, and Vodafone Idea’s unsustainable indebtment, our long-term forecast points to a lumpy RAN market. There is no surprise that India is a tough cellular market characterized by flat subscriber growth, ultralow ARPUs and low equipment average sales pricing.
- Open RAN is the brightest spot with a penetration of the total RAN market that will surpass 50% by 2028.
- At the same time, a mushrooming energetic local ecosystem is rising with great international ambitions enabled by strong ties between the U.S. and India.
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References:
https://www.lightcounting.com/report/september-2023-india-wireless-infrastructure-217
https://www.lightcounting.com/report/september-2023-open-vran-market-213
Reliance Jio in talks with Tesla to deploy private 5G network for the latter’s manufacturing plant in India
OTT players in India struggle in telco partnerships
Communications Minister: India to be major telecom technology exporter in 3 years with its 4G/5G technology stack
India to set up 100 labs for developing 5G apps, business models and use-cases
Adani Group to launch private 5G network services in India this year
LightCounting: Wireless infrastructure market down in 2Q-23 (no surprise)
| Historical data accounts for sales of the following vendors: | |||
| Vendor | Segments | Source of Information | |
| Altran | vRAN | Estimates | |
| Amdocs | 5GC | Estimates | |
| ASOCS | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Baicell | RAN (RU) | None, supplies other RAN/vRAN vendors | |
| Benetel | Open RAN (RU) | None, supplies other RAN/vRAN vendors | |
| Cisco | EPC, vEPC, 5GC | Survey data and estimates | |
| China Information and Communication Technologies Group (CICT) | RAN | Estimates | |
| Comba Telecom | RAN/vRAN (RU) | None, supplies other RAN/vRAN vendors | |
| CommScope (acquired Phluido vRAN patents, October 2020) | vRAN (RU, DU) | Estimates | |
| Corning | vRAN | Estimates | |
| Dell | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Enea | 5GC | Estimates | |
| Ericsson | RAN, vRAN, 2/3G Core, EPC, vEPC, 5GC | Estimates | |
| Fairwaves | RAN/vRAN (RU) | None, supplies other RAN/vRAN vendors | |
| Fujitsu | RAN | Survey data and estimates | |
| HPE | 2G/3G core, 5GC | Estimates | |
| Huawei | RAN, vRAN, 2/3G Core, EPC, vEPC, 5GC | Survey data and estimates | |
| JMA Wireless | vRAN | Estimates | |
| KMW | RAN/vRAN (RU) | None, supplies other RAN/vRAN vendors | |
| Kontron | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Mavenir (acquired ip.access, September 2020) | vEPC, vRAN, 5GC | Survey data and estimates | |
| Microsoft (acquired Metaswitch and Affirmed Networks, 2020) | 5GC, vEPC and 2G/3G core | Estimates | |
| Movandi | RAN/vRAN (RU/repeater) | Estimates | |
| MTI Mobile | vRAN (RU) | None, supplies other RAN/vRAN vendors | |
| Node-H | vRAN (small cells) | Estimates | |
| Nokia | RAN, vRAN, 2/3G Core, EPC, vEPC, 5GC | Survey data and estimates | |
| NEC (including Blue Danube Systems, January 2022) | RAN, vRAN (RU), EPC, 5GC | Survey data and estimates | |
| Oracle | 5GC | Estimates | |
| Parallel Wireless | vRAN (CU, DU) | Estimates | |
| Pivotal | RAN/vRAN (RU/mmWave repeater) | Estimates | |
| Quanta Cloud Technology (QCT) | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Qucell | RAN, vRAN | Estimates | |
| Rakuten Symphony (acquired Altiostar, August 2021) | vRAN (CU, DU) | Estimates | |
| Ribbon Communications | 2G/3G core | Survey data and estimates | |
| Samsung | RAN, vRAN, vEPC, 5GC | Estimates | |
| Silicom | Open RAN (DU) | None, supplies other RAN/vRAN vendors | |
| SuperMicro Computer | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Verana Networks | RAN/vRAN (RU/mmWave) | Estimates | |
| ZTE | RAN, vRAN, 2/3G Core, EPC, vEPC, 5GC | Survey data and estimates | |
Dell’Oro: RAN Market to Decline 1% CAGR; Mobile Core Network growth reduced to 1% CAGR
According to a newly published forecast report by Dell’Oro Group,the Radio Access Network (RAN) market is done expanding for now. Following the 40% to 50% ascent between 2017 and 2021, RAN revenues flattened out in 2022 and these trends extended to 1Q 2023.
“Even if it is early days in the broader 5G journey, the challenge now is the comparisons are becoming more challenging in the more mature 5G markets and the upside with the slower-to-adopt 5G regions is not enough to extend the growth streak,” said Stefan Pongratz, Vice President at Dell’Oro Group.
“Meanwhile, growth from new revenue streams including Fixed Wireless Access and enterprise LTE/5G is not ramping fast enough to change the trajectory. With 5G-Advanced not expected to trigger a new capex cycle, the question now is no longer whether RAN will grow. The question now is, rather, how much will the RAN market decline before 6G comes along?” Pongratz added.
Additional highlights from the Mobile RAN 5-Year July 2023 Forecast Report:
- Global RAN is projected to decline at a 1 percent CAGR over the next five years.
- The less advanced 5G regions are expected to perform better while the more developed 5G regions, such as North America and China, are projected to record steeper declines.
- LTE is still handling the majority of the mobile data traffic, but the focus when it comes to new RAN investments is clearly on 5G. Even with the more challenging comparisons, 5G is projected to grow another 20 percent to 30 percent by 2027, which will not be enough to offset steep declines in LTE.
- With mmWave comprising a low single-digit share of the RAN market and skepticism growing about the MBB business case, it is worth noting that our position has not changed. We still envision that the mmWave spectrum will play a pivotal role in the long-term capacity roadmap.
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Separately, Dell’Oro again lowered its forecasts for the Mobile Core Network market (which is now 5G SA core network), this time citing a slowdown in customer growth. It now predicts that the worldwide market for mobile core networks will expand at a CAGR of 1% over the next five years, having previously forecast a 2% CAGR as recently as January.
“We have reduced our forecast for the third consecutive time, primarily caused, this time, by an expected slowdown in subscriber growth,” said Dave Bolan, Research Director at Dell’Oro Group.
Dave said that Dell’Oro has reduced its expectations for the Multi-Access Edge Computing (MEC) market (which requires 5G SA core network). It now anticipates MEC will have a CAGR of 31%, noting that commercially-viable enterprise applications are taking much longer to come to fruition than many had hoped.
“Mobile Network Operators (MNOs) are concerned about inflation, a possible recession, and political conflicts. They are therefore being restrained in their capital expenditures, another factor weighing in on a more conservative forecast,” said Bolan. “As we continue refining our count of MNOs that have launched 5G Standalone (5G SA) eMMB networks, we note that only 4 MNOs have commercially deployed new 5G SA networks compared to six in the first half of 2022,” he added.
Additional highlights from the Mobile Core Network & Multi-Access Edge Computing 5-Year July 2023 Forecast Report:
- Year-over-year MCN revenue growth rates are projected to be flat in 2026 and turn negative in 2027.
- The North America and China regions are expected to have negative CAGRs, while Europe, Middle East, and Africa (EMEA), and Asia Pacific excluding China regions are expected to have the highest positive CAGRs.
Vodafone became one of those first-half 2023 launches, when it brought 5G Ultra to market in the UK in late June. In its latest Mobility Report, published around the same time, Ericsson noted that while around 240 telcos have launched commercial 5G services, only 35 of them have brought standalone 5G to market.
That should bode well for the mobile core market, and indeed it is faring better than the RAN space, in growth potential terms, at least.
Nonetheless, Dell’Oro predicts that year-on-year growth rates in mobile core network revenues will be flat by 2026 and turn negative the following year.
Dell’Oro Group’s Mobile RAN 5-Year Forecast Report offers a complete overview of the RAN market by region – North America, Europe, Middle East & Africa, Asia Pacific, China, and Caribbean & Latin America, with tables covering manufacturers’ revenue and unit shipments for 5GNR, 5G NR Sub 6 GHz, 5G NR mmW and LTE pico, micro, and macro base stations. The report also covers Open RAN, Virtualized RAN, small cells, and Massive MIMO. To purchase this report, please contact us by email at [email protected].
Dell’Oro Group’s Mobile Core Network & Multi-Access Edge Computing 5-Year July Forecast Report offers a complete overview of the market for Wireless Packet Core including MEC for the User Plane Function, Policy, Subscriber Data Management, and IMS Core with historical data, where applicable, to the present. The report provides a comprehensive overview of market trends by network function implementation (Non-NFV and NFV), covering revenue, licenses, average selling price, and regional forecasts for various network functions. To learn more about this report, please contact us at [email protected].
Dell’Oro Group is a market research firm that specializes in strategic competitive analysis in the telecommunications, security, enterprise networks, and data center infrastructure markets. Our firm provides in-depth quantitative data and qualitative analysis to facilitate critical, fact-based business decisions. For more information, contact Dell’Oro Group at +1.650.622.9400 or visit www.delloro.com.
References:
RAN Market to Decline at a 1 Percent CAGR Through 2027, According to Dell’Oro Group
Slower Subscriber Growth to Cut Mobile Core Network Market Growth, According to Dell’Oro Group
Dell’Oro: U.S. suppliers ~20% of global telecom equipment market; struggling in RAN business
According to Stefan Pongratz of Dell’Oro, U.S. suppliers collectively accounted for around 16% of the global telecom equipment market in 2022, underpinned by strong presence in broadband access, optical transport and Service Provider Routers. Not surprisingly, this global view is masking the progress to some degree. If we exclude China, we estimate that the 20+ American suppliers comprise ~20% of the broader telecom equipment market.
U.S. suppliers appear to be struggling more in the RAN market. Per Dell’Oro’s 4Q22 RAN report, the American-based vendors still accounted for less than 1% of the global RAN market in 2022. Even if China is removed, the aggregate revenue share remains in the same range.
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Editor’s Note: The big 5 have dominated the global RAN market for over 15 years. Huawei, Ericsson, Nokia, ZTE, and Samsung together have about 95% of the global RAN market. Pongratz expects global RAN revenues to decline at a low-single-digit rate for 2023, with a surge in spending from India-based operators to fuel their 5G plans offset by dropping demand in China, Europe, and North America.
“After four years of extraordinary growth that catapulted the RAN market to record levels in 2021, the RAN market is now entering a new phase,” Pongratz wrote. “Even with 5G still increasing at a healthy pace, comparisons are more challenging and the implication for the broader RAN market is that growth is decelerating.”
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Dell’Oro estimates that the collective RAN revenues for the U.S. suppliers had an increased of 60% in 2022 relative to 2020, in part because of the improved entry points with Open RAN. U.S. network equipment vendors are fairly optimistic about the growth prospects:
- Mavenir is targeting 30%+ growth in 2023. While the mobile core network continues to drive the lion’s share of its revenue mix, Mavenir’s 10,000+ macro-site brownfield pipeline is expected to play a pivotal role in reaching this $1 billion group revenue target for FY23.
- Celona is working with 100+ customers and has seen a 300%+ increase in the number of connected devices across its 5G installed base. The vendor is now targeting to more than double its revenues this fiscal year.
- JMA has not shared any growth objectives for its wireless business. Even so, the vendor has announced multiple DoD wins and believes its all-American team is well positioned to support advanced private 5G networks for the U.S. government.
- Verana Networks is set to work on a trial with Verizon later this year.
- Dell is planning to enter the vRAN market over the next year, allegedly.
- Airspan’s equipment and software revenue growth slowed in 2022. Still, trial activity is on the rise and Airspan remains hopeful that its 400+ private network wins will soon have a more meaningful impact on the topline.
At the same time, it is early days in this process of re-shaping the RAN. And even if global market concentration as measured by the Herfindahl-Hirschman Index (HHI) is actually trending in the right direction, vendors with smaller footprints are still trying to figure out the best near-term and long-term approaches to improve their respective RAN positions – some think that open RAN can be an entry point for brownfield macro opportunities while others believe the likelihood of winning is greater in greenfield settings (public or private).
Open RAN might help to open the door, but this movement does not change the fact that RAN remains a scale game and double-digit RAN revenue shares are still required to maintain competitive portfolios.
Currently, this vendor asymmetry between RAN and the broader telecom equipment market then also implies that the U.S. suppliers are actually doing rather well beyond the wireless scope. In fact, if we remove the RAN from the picture, we estimate that the U.S. vendors accounted for around a fourth of the global non-RAN telecom equipment market. Better yet, if we take it one step further and also strip out China, the data shows that the American team comprised around one third of the non-RAN telco equipment market excluding China.
Dell’Oro’s assessment is that the U.S. suppliers hold a strong position in the non-RAN telecom equipment market. When it comes to RAN, however, the data shows that the American-based suppliers are moving in the right direction, especially in private wireless. But the overall progress has been slow, and it is still a long road ahead before we can establish that the U.S. suppliers are back at full speed in the broader public plus private 5G RAN business
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Stefan Pongratz is a vice president at the Dell’Oro Group. He joined Dell’Oro in 2010 after spending 10 years with the Anritsu Company. Pongratz is responsible for the firm’s Radio Access Network and Telecom Capex programs and has authored advanced research reports on the wireless market assessing the impact and the market opportunity with small cells, C-RAN, 5G, IoT and CBRS.
References:
https://www.fiercewireless.com/wireless/what-state-us-ran-and-non-ran-suppliers-pongratz
Dell’Oro: Worldwide Telecom Equipment Market Growth +3% in 2022; MTN: +2% Network Infrastructure Growth in 2022
Dell’Oro: Private 5G ecosystem is evolving; vRAN gaining momentum; skepticism increasing
Dell’Oro: 5G RAN growing; total RAN growth is slowing over next 5 years
Dell’Oro: RAN Market Disappoints in 2Q-2022
Dell’Oro: Market Forecasts Decreased for Mobile Core Network and Private Wireless RANs
NTIA’s Wireless Innovation Fund to stimulate open 5G and future-gen wireless markets; OpenRAN rebuttal
The U.S. Commerce Department’s National Telecommunications and Information Administration (NTIA) has officially launched its Wireless Supply Chain Innovation Fund, which has a budget of $1.5 billion and a mandate to spend it on stimulating the development of new and exciting telco technology. It’s mission is to “open 5G and future-gen wireless markets to innovation and entrepreneurship in the U.S., as well as by our partners and allies.”
NTIA will work to catalyze the development and adoption of open, interoperable, and standards-based networks through the Innovation Fund. Authorized under the Fiscal Year 2021 National Defense Authorization Act and funded through the CHIPS and Science Act of 2022, this ten-year grant program will help drive wireless innovation, foster competition, and strengthen supply chain resilience. It will also help unlock opportunities for companies from the United States and its global allies, particularly small and medium enterprises, to compete in a market historically dominated by a few suppliers, including high-risk suppliers that raise security concerns.
On Wednesday, NTIA announced its first notice of funding opportunity (NOFO), which invites interested parties to apply for some of that money. This first tranche of grants, worth up to $140.5 million, has been earmarked for projects focused on OpenRAN R&D. By demonstrating the viability of new, open-architecture approaches to wireless networks, this initial round of funding will help to ensure that the future of 5G and next-gen wireless technology is built by the U.S. and its global allies and partners –not vendors from nations that threaten America’s national security.
“The Innovation Fund is a critical step toward securing 5G wireless networks while driving innovation at home and abroad,” said Commerce Secretary Raimondo. “Investing in the next generation of innovation will unlock opportunities for new and emerging companies to compete in the global telecom market, strengthen our telecom supply chains and provide our allies and friends with trusted choices and innovative technologies to compete in the 21st Century. We look forward to bringing the best of industry, academia, and the public together to deliver on this initiative.”
NTIA’s first NOFO aims to expand and improve testing to demonstrate the viability of new approaches to wireless like open radio access networks (OpenRAN) and remove barriers to adoption. NTIA anticipates it will award up to $140.5 million during this first tranche of grants. The first round of awards will provide for a range of R&D and testing activities in this critical field, including:
- Expanding industry-accepted testing and evaluation (T&E) activities to assess and facilitate the interoperability, performance, and/or security of open and interoperable, standards-based 5G radio access networks; and
- Developing new or improved testing methodologies to test, evaluate, and validate the interoperability, performance, and/or security of these networks, including their component parts.
Later NOFOs will build upon the foundational work of this first NOFO, creating an ecosystem for wireless innovation built by the U.S. and its global allies.
“This fund is a critical down payment on our efforts to reshape the global wireless infrastructure supply chain towards secure and trusted vendors,” said Sen. Mark Warner (VA). “I look forward to seeing how the Department – working with U.S. and allied innovators and network operators – helps encourage this market to move towards security, interoperability, and greater wireless innovation.”
“With the investments from this initiative, the US can help facilitate much-needed competition in the global wireless market and create a more resilient and secure wireless supply chain,” said Assistant Secretary of Commerce Alan Davidson.
“Today’s announcement marks critical new progress toward strengthening the security of our wireless networks,” added energy and commerce committee ranking member Frank Pallone. “This program is a win for both U.S. national security and innovation, and with it, we will help level the playing field against untrusted actors attempting to use our communications networks against us.”
This announcement comes the same week as the U.S. moved forward with its plan to name and punish any ally that permits the use of network equipment developed by Chinese vendors Huawei and ZTE. The ‘Countering Untrusted Telecommunications Abroad Act’ is reportedly due to have its second reading this week.
Separately, the NOFO announcement came a day after the UK unveiled its own strategy for driving innovation in the telecoms sector. The UK government seems to have implied that it wouldn’t necessarily oppose consolidation in the mobile market, insisting that there is no magic number of operators.
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Comment and Analysis – OpenRAN Rebuttal:
This author and several of his colleagues have been negative on OpenRAN for a very long time. The main reason is that Open RAN specs (which are to ensure multi-vendor interoperability) are being developed by the O-RAN Alliance, with test scripts from the TIP OpenRAN project. Neither of those entities are Standards Development Organizations (SDOs). While O-RAN did forge an alliance with ATIS, that won’t help much as ATIS has not developed any cellular standards on its own.
The two organizations that develop all the cellular specs and standards are 3GPP and ITU-R IMT yet O-RAN Alliance does not have a liaison with either of them!
Here is the opinion of our colleague John Strand, Principal of StrandConsult on why Open RAN is popular in some countries and with selected media, but really has no serious market potential:
The U.S. State Department spends a lot of energy promoting OpenRAN as an alternative to Chinese vendors like Huawei and ZTE. It is described quite well in this article. I had a meeting with those people at the State Department in Washington on December 8th last year, and they understand that OpenRAN was not a product that operators were buying.
In Europe, operators such as Deutsche Telecom and Vodafone have bet big on Huawei. That’s described in our reports: Understanding the Market for 4G RAN in Europe: Share of Chinese and Non-Chinese Vendors in 102 Mobile Networks – Strand Consult and The Market for 5G RAN in Europe: Share of Chinese and Non-Chinese Vendors in 31 European Countries – Strand Consult
Europe has also agreed that it is not smart to build vital telecom infrastructure using network equipment from China, the EU 5G tool box. For Vodafone and DT, OpenRAN is their excuse to stick with the Chinese vendors. Their story is that when OpenRAN is ready, we will replace Huawei equipped with OpenRAN vendors- when it is ready for mass market.
- The vendors who bet on OpenRAN spend a lot of money on sponsoring events with media that subsequently write a lot of positive stories, praising the technology. When I joke, I refer to TelecomTV as “OpenRAN TV.” I would guess that 95% of the OpenRAN events are sponsored events, and a lot of the articles is related to the same events.
- There are a number of politicians in countries that have 2G, 3G, 4G and 5G and they all want to dominate 6G. They have not realized that innovation is happening in global companies such as Nokia, Ericsson, Qualcomm, Samsung and Huawei/ZTE that built their own proprietary network equipment.
- The 5G and 6G standards work with 3G, 4G, 5G, and 6G happens in 3GPP and ITU-R (ATIS carries 3GPP contributions into ITU-R WP5D directed at ITU-R IMT standards (i.e. reccommendations). The next G does not come from a nation or a company, but from a group of global companies.
- For some people believe OpenRAN is the next G, but that’s total nonsense! Only ITU-R (WP 5D) is responsible for all the cellular G’s as part of International Mobile Telecommunications (IMT) recommendations and there is NO WORK IN ITU-R on OpenRAN!!!
- There are a number of companies that make their living selling market information, companies which over the last 20 years have been hit financially because there has been a consolidation of the infrastructure industry. It is in their interest that the number of suppliers is increased, it gives them access to a larger customer base. OpenRAN is a new product segment and represent around 30 – 40 potential customers with a budget.
- GSMA, along with some of their members, has marketed a narrative that there are not many suppliers in this industry and that there is a need for more supplier diversity. It’s not a true story if you look at how many vendors are exhibiting at Mobile World Congress. It is also a story that does not seem credible when these same operators are crying out for the possibility of consolidating the market. The consolidation there has been when it comes to infrastructure, it is driven by mobile operators who have changed their purchasing habits and bet on fewer suppliers.
–>To put it very simply, the less people know about the cellular communications market, the happier they are about OpenRAN.
References:
https://ntia.gov/page/public-wireless-supply-chain-innovation-fund
https://www.federalregister.gov/documents/2022/12/13/2022-26938/public-wireless-supply-chain-innovation-fund-implementation
https://telecoms.com/521184/us-dangles-1-5bn-in-front-of-open-ran-community/
Ericsson warns profit margins at RAN business set to worsen
Ericsson on Friday reported lower than expected 4th-quarter core earnings as sales of 5G equipment slowed in high-margin markets such as the United States, sending the Swedish company’s shares to their lowest since 2018.
Ericsson is the latest tech company to show the impact of customers tightening belts amid concerns about a global economic slowdown. Others have been cutting staff, including Microsoft (10,000) and Google parent Alphabet (12,000) which have announced thousands of job cuts this week while Amazon had announce 10,000 layoffs several weeks ago.
Ericsson has already announced plans to cut costs by 9 billion crowns ($880 million) by the end of 2023.
Chief Financial Officer Carl Mellander told Reuters that would involve reducing consultants, real estate and also employee headcount. “It’s different from geography to geography, some are starting now, and we’ll take it unit by unit, considering the labour laws of different countries,” Mellander said, referring to the cuts.
Mellander declined to say if the job cuts would be similar to 2017 when Ericsson laid off thousands of employees and focused on research to return the company to profitability.
Last week, the company said it would book a 2.3 billion Swedish crown ($220 million) provision for an expected fine from U.S. authorities for breach of a settlement reached in 2019.
Ericsson’s net sales rose in the fourth quarter, but margins, net income and core earnings fell. Its gross margin for the fourth quarter of 2022 fell to 41.4% from 43.2%.
Ericsson said it expected a fall in margin in its Networks business to persist through the first half of 2023, but the effect of cost savings to emerge in the second quarter.
JPMorgan analysts said given the fall in margins and higher investments, they would expect 2023 earnings to decline by a double digit percentage.
Inge Heydorn, partner and fund manager at investment firm GP Bullhound, said: “The fourth quarter shows once again that the U.S. has a big impact on Ericsson’s margins.”
With U.S. customers such as Verizon tightening their purse strings, Ericsson is hoping newer markets such as India can provide some growth. Its South East Asia, Oceania and India market was the only one to grow in the quarter, rising 21%, accounting for 13% of the company’s business.
The company’s fourth-quarter adjusted operating earnings, excluding restructuring charges, fell to 9.3 billion Swedish crowns from 12.8 billion a year earlier. That was short of the 11.22 billion expected by analysts, Refinitiv Eikon data showed. Net sales rose 21% to 86 billion crowns, beating estimates of 84.2 billion.
A settlement of a patent deal with Apple (AAPL.O) last month resulted in revenue of 6 billion crowns, but Ericsson also took 4 billion crowns in charges, including a provision for a potential fine from U.S. regulators and divestments.
However, there was some good news.
- Ericsson said it expects significant patent revenue growth over the coming 18-24 months.
- Ericsson, outside China, remains the company to beat in 5G. Its share of the market for radio access networks (RANs) appears to have increased several years in a row – from 33% in 2017 to 39% now.
- Ericsson is healthily profitable, which could not be said when CEO Ekholm took charge in 2017.
- Boosted by recent takeover activity and a major licensing deal with Apple, its headline sales for the final quarter of 2022 were up 21%, to 86 billion Swedish kronor (US$8.4 billion), compared with the same period a year before.
However, Ericsson has experienced one of its biggest profit slumps since the first half of Ekholm’s tenure. Hurt by higher costs and SEK4 billion ($390 million) worth of one-off charges – relating to US fines, write-downs and divestiture – its net income dropped by 39%, to SEK6.2 billion ($600 billion). Worse, all the various profit margins thinned, with Ericsson’s closely monitored EBIT (earnings before interest and tax) margin shrinking to just 9.1%, from 16.1% a year earlier. And the outlook is frosty.
The mini-boom in 5G spending appears to be over – temporarily, at least. Last year, the market for RAN products, where Ericsson now generates about 70% of its revenues, grew by around 5%, according to data from Dell’Oro, a market research firm that Ericsson uses. This year, RAN market sales are expected to fall by 1%. And in North America, responsible for nearly 30% of Ericsson’s overall revenues, Dell’Oro predicts they will drop by a worrying 7%.
After investing heavily in network rollouts during the last couple of years, many operators are cutting their expenditure amid signs of an economic downturn, and reducing the equipment stockpiles they built up when supplies were tight. “We expect operators to adjust inventory levels as the supply situation eases and we plan for these trends to continue during the first half of 2023,” said Ekholm on Ericsson’s earnings call today.
“The first half is really where we’ll see the sizeable inventory adjustments,” said Ekholm, answering questions asked by analysts. “Operators can sweat assets for a couple of quarters but it cannot be done much more [than that] because of the traffic growth underneath. That is the way to model it.” Ericsson’s expectation is that total mobile data traffic worldwide will grow by a factor of five between 2022 and 2028.
Given the market slowdown, turbulence of the last year and seemingly endless difficulties at smaller units, it is easy to forget that Ericsson remains a solid and successful business. But it has become more reliant on RAN sales under Ekholm – generating more than 70% of its revenues in that market last year, compared with just 47% in 2016. Ekholm clearly restored Ericsson’s reputation as a RAN provider. Amid the slowdown in that sector (zero growth forecast by Dell’Oro through 2027), his big challenge now is to prove it can thrive elsewhere.
Andrew Gardiner, analyst at Citi, said the announcements demonstrated the “significant challenges” the company faced this year. “We view Ericsson’s outlook as one of fundamentals deteriorating in the next quarter or two, as it aims to improve in the second half and beyond,” he added.
References:
https://www.reuters.com/technology/ericsson-quarterly-earnings-miss-expectations-2023-01-20/
https://www.ft.com/content/dd5cb329-f5bd-4b78-bde1-ca7510daaa7a
Dell’Oro: 5G RAN growing; total RAN growth is slowing over next 5 years
According to a newly published forecast report by Dell’Oro Group, after four years of extraordinary growth that propelled the radio access network (RAN) market to reach new record levels, the RAN market is now transitioning from the expansion phase to the next phase in this 5G journey with more challenging comparisons and slower growth.
“It is still early days in the 5G journey but at the same time, the coverage and capacity phases that have shaped the capex cycles with previous technology generations still hold,” said Stefan Pongratz Vice President and analyst with the Dell’Oro Group. “Still, even with the expected changes in capital intensities as the operators reach their initial 5G coverage targets, the plethora of 5G frequencies taken together with the upside from FWA and eventually private 5G, will curb the peak-to-trough decline relative to 2G-4G,” continued Pongratz.
Editor’s Note: In December, Ericsson said it expects the RAN market to be flat with 5G build-out still in its early days.
Additional highlights from the Mobile RAN 5-Year January 2023 Forecast Report:
- Global RAN is projected to grow at a zero percent CAGR outside of China by 2027. See chart below.
- The less advanced MBB regions are expected to grow while RAN investments in both China and North America are expected to decline at mid-single digit CAGRs over the forecast period.
- 5G RAN is expected to grow another 25 percent to 30 percent by 2027, though this will barely be enough to offset steep declines in LTE.
- mmWave projections have been revised downward over the near term and upward in the outer part of the forecast to reflect the potential upside with higher EIRP solutions.
- Small cell RAN revenue growth has been outpacing macros for some time now and these trends are expected to extend throughout the forecast period, with small cell RAN revenues growing more than 20 percent by 2027.
Dell’Oro Group’s Mobile RAN 5-Year Forecast Report offers a complete overview of the Mobile RAN industry by region – North America, Europe, Middle East & Africa, Asia Pacific, China, and Caribbean & Latin America, with tables covering manufacturers’ revenue and unit shipments for 5GNR, 5G NR Sub 6 GHz, 5G NR mmW and LTE pico, micro, and macro base stations. The report also covers Open RAN, Virtualized RAN, small cells, and Massive MIMO. To purchase this report, please contact by email at [email protected].
Dell’Oro Group is a market research firm that specializes in strategic competitive analysis in the telecommunications, security, enterprise networks, and data center infrastructure markets. Our firm provides in-depth quantitative data and qualitative analysis to facilitate critical, fact-based business decisions. For more information, contact Dell’Oro Group at +1.650.622.9400 or visit www.delloro.com
References:
5G RAN is Growing but Total RAN Growth is Slowing over Next Five Years, According to Dell’Oro Group
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