Dell’Oro Group has completed its 1H2021 reports on “Telecommunications Infrastructure programs” including Broadband Access, Microwave & Optical Transport, Mobile Core & Radio Access Network (RAN), Service Provider Router & Switch markets. The data contained in these reports suggest that the positive trends that characterized the broader telecom equipment market extended into the second quarter, even if the pace of the growth slowed somewhat between the first and the second quarter.
Preliminary estimates suggest the overall telecom equipment market advanced 10% year-over-year (Y/Y) during 1H21 and 5% Y/Y in the quarter, down from 16% Y/Y in the first quarter. The growth in the first half was primarily driven by strong demand for both wireless and wireline equipment, lighter comparisons, and the weaker US Dollar (USD). Helping to explain the Y/Y growth deceleration between 1Q and 2Q is slower growth in China.
The analysis contained in these reports suggests the collective global share of the leading suppliers remained relatively stable between 2020 and 1H21, with the top seven vendors comprising around ~81% of the total market.
Huawei is still the overall market leader by some margin, despite its sales and marketing challenges in many other parts of the world. Huawei’s market share slid below 30%, though that still almost double the share of its nearest rivals Ericsson and Nokia. Within the mix, Dell-Oro estimates Huawei and Nokia lost some ground between 2020 and 1H21 while Cisco, Ericson, Samsung, and ZTE recorded minor share gains over the same period.
Additional key takeaways from the 1H2021 reporting period include:
- Following the Y/Y decline in 1Q20, our analysis suggests the overall telecom equipment market recorded a fifth consecutive quarter of growth in the second quarter.
- The improved market sentiment in the first half was relatively broad-based, underpinned by single-digit growth in SP Routers and double-digit advancements in Broadband Access, Microwave Transport, Mobile Core Networks, and RAN.
- Aggregate 2Q21 revenues were in line with expectations, however, within the programs both Broadband Access and Microwave Transport were surprised on the upside while Optical Transport and SP Routers came in below expectations.
- From a regional perspective, China underperformed in the quarter, impacting the demand for both wireless and wireline-related infrastructure.
- Ongoing efforts by the US government to curb the rise of Huawei are starting to show in the numbers outside of China, not just for RAN but in other areas as well.
- Though Huawei is not able to procure custom ASICs for its telecom products, the supplier is assuring the analyst community its current inventory levels is not a concern over the near term for its infrastructure business.
- The majority of the vendors have through proactive measures been able to navigate the ongoing supply chain shortages and minimize the infrastructure impact. At the same time, the supply constraints appear more pronounced with higher volume residential and enterprise products including CPE and WLAN endpoints.
- Even with the unusual uncertainty surrounding the economy, the supply chains, and the pandemic, the Dell’Oro analyst team remains optimistic about the second half – the overall telecom equipment market is projected to advance 5% to 10% for the full-year 2021, unchanged from last quarter.
Two of the key telecom revenue drivers will be the RAN and Broadband Access markets, both of which have been growing at a strong pace this year so far: The RAN market is set to grow at between 10% and 15% this year, which means it could be worth as much as $40 billion, while the increasing number and size of investments in fibre broadband access networks around the world is driving growth in the Broadband Access market, which Dell’Oro reports was worth $3.6 billion during the second quarter alone.
Dell’Oro Group telecommunication infrastructure research programs consist of the following: Broadband Access, Microwave Transmission & Mobile Backhaul, Mobile Core Networks, Mobile Radio Access Network, Optical Transport, and Service Provider (SP) Router & Switch.
Worldwide 5G network infrastructure revenue is on pace to grow 39% to total $19.1 billion in 2021, up from $13.7 billion in 2020, according to the latest forecast by Gartner, Inc.
Communications service providers (CSPs) in mature markets accelerated 5G development in 2020 and 2021 with 5G representing 39% of total wireless infrastructure revenue this year.
“The COVID-19 pandemic spiked demand for optimized and ultrafast broadband connectivity to support work-from-home and bandwidth-hungry applications, such as streaming video, online gaming and social media applications,” said Michael Porowski, senior principal research analyst at Gartner.
5G is the fastest growing segment in the wireless network infrastructure market (see Table 1). Of the segments that comprise wireless infrastructure in this forecast, the only significant opportunity for investment growth is in 5G. Investment in legacy wireless generations is rapidly deteriorating across all regions and spending on non-5G small cells is poised to decline as CSPs move to 5G small cells.
Table 1: Wireless Network Infrastructure Revenue Forecast, Worldwide (Millions of U.S. Dollars)
|Segment||2020 Revenue||2021 Revenue||2022 Revenue|
|LTE and 4G||17,127.8||14,569.1||12,114.0|
|3G and 2G||3,159.6||1,948.2||1,095.2|
|Small Cells Non-5G||6,588.5||7,117.9||7,113.9|
Source: Gartner (August 2021)
Regionally, CSPs in North America are set to grow 5G revenue from $2.9 billion in 2020 to $4.3 billion in 2021, due, in part, to increased adoption of dynamic spectrum sharing and millimeter wave base stations. In Western Europe, CSPs will prioritize on licensing spectrum, modernizing mobile core infrastructure and navigating regulatory processes with 5G revenue expected to increase from $794 million in 2020 to $1.6 billion in 2021.
Greater China is expected to maintain the No.1 global position in global 5G revenue reaching $9.1 billion in 2021, up from $7.4 billion in 2020. With China’s government funding 5G development for the three state owned carriers, that’s no surprise.
The big beneficiaries of China’s 5G infrastructure spending will be its domestic equipment makers, Huawei, ZTE, and (state owned) Datang Telecom. Despite clamoring for Sweden to permit Huawei 5G equipment to be deployed, Ericsson only received 3% of a joint 5G radio contracts from China Telecom, China Unicom and 2% from China Mobile, according to Reuters. Nokia, which was expected to take away Ericsson’s market share in China, did not receive any share, according to a tender document published by the Chinese companies.
In a way that’s a win for the Swedish vendor – and a brief share price hike backs up that statement – which won just 2% of an earlier deal from China Mobile. But if they want to secure their share of the multiple billions of dollars of global 5G infrastructure revenues forecast by Gartner, the likes of Ericsson and Nokia will need to keep winning contracts in their home markets.
5G Coverage in Tier-1 Cities Will Reach 60% in 2024:
While 10% of CSPs in 2020 provided commercialized 5G services, which could achieve multiregional availability, Gartner predicts that this number will increase to 60% by 2024, which is a similar rate of adoption for 4G- LTE in the past.
“Business and customer demand is an influencing factor in this growth. As consumers return to the office, they will continue to upgrade or switch to gigabit fiber to the home (FTTH) service as connectivity has become an essential remote work service,” said Porowski. “Users will also increasingly scrutinize CSPs for both office and remote work needs.”
This rapid shift in customer behavior is driving growth in the global passive optical network (PON) market as a preferred technology. The 10-Gigabit-capable symmetric-PON (XGS-PON) is not a new technology and with the price difference with other technologies narrowing, CSPs are willing to invest in XGS-PON to differentiate themselves in customer experience and network quality. Gartner estimates that by 2025, 60% of Tier-1 CSPs will adopt XGS-PON technology at large-scale to deliver ultrafast broadband services to residential and business users, up from less than 30% in 2020.
Gartner clients can learn more in the reports “Forecast Analysis: Communications Service Provider Operational Technology, Worldwide” and “Forecast: Communications Service Provider Operational Technology, Worldwide, 2019-2025, 2Q21 Update.”
While Gartner did not split out small cells’ contribution to the overall 5G infrastructure segment, evidence thus far suggests the market is progressing more slowly than many had once believed.
Last month, Crown Castle increased its guidance for the second time this year due to a strong cell towers market, but halved the number of small cells it expects to deploy in 2021 to 5,000. The company noted that wireless network operators have focused on tower-based 5G rollouts at the expense of small cells.
Preliminary estimates from Dell’Oro Group suggests the overall telecom equipment market – Broadband Access, Microwave & Optical Transport, Mobile Core & Radio Access Network, SP Router & Switch – started the year on a high note, advancing 15% year-over-year (Y/Y) in the 1st quarter of 2021, reflecting positive activity in multiple segments and regions, lighter comparisons, and a weaker US Dollar (USD).
The analysis contained in these reports suggests the collective global share of the leading suppliers remained relatively stable between 2020 and 1Q2021, with the top seven vendors comprising around ~80% of the total market. Not surprisingly, Huawei maintained its leading position. However, the gap between Nokia and Ericsson, which was around 5 percentage points back in 2015, continued to shrink and was essentially eliminated in the quarter. In addition, Samsung passed Ciena in the quarter to become the #6 supplier.
Excluding North America, we estimate Huawei’s revenue share was about 36% in the quarter, nearly the same as the combined share of Nokia, Ericsson, and ZTE.
Additional key takeaways from the 1Q2021 reporting period include:
- Following three consecutive years of growth between 2018 and 2020, preliminary readings suggest the positive momentum that characterized the overall telco market in much of 2020 extended into the first quarter, underpinned by double-digit growth on a Y/Y basis in both wireless and wireline technologies including Broadband Access, Microwave Transport, Mobile Core Network, RAN, and SP Router & Switch.
- In addition to easier comparisons due to poor market conditions in 1Q20 as a result of supply chain disruptions impacting some segments, positive developments in the North America and Asia Pacific regions, both of which recorded growth in excess of 15% Y/Y during the first quarter, helped to explain the output acceleration in the first quarter.
- Aggregate gains in the North America region were driven by double-digit expansion in Broadband Access, RAN, and SP Routers & Switch.
- The results in the quarter surprised on the upside by about 2%, underpinned by stronger than expected activity in multiple technology domains including Broadband Access, Microwave Transport, RAN, and SP Routers & Switch.
- The shift from 4G to 5G continued to accelerate at a torrid pace, impacting not just RAN investments but is also spurring operators to upgrade their core and transport networks.
- At a high level, the suppliers did not report any material impact from the ongoing supply chain shortages in the first quarter. At the same time, multiple vendors did indicate that the visibility going into the second half is more limited.
- Overall, the Dell’Oro analyst team is adjusting the aggregate forecast upward and now project the total telecom equipment market to advance 5% to 10% in 2021, up from 3% to 5% with the previous forecast.
- Cisco was the top-ranked vendor for market share, followed by Huawei, Nokia, and Juniper.
- The SP Router and Switch market is forecasted to grow at a mid-single-digit rate in 2021.
- The adoption of 400 Gbps technologies is expected to drive double-digit growth for the SP Core Router market in 2021.
Huawei has increased its lead as the#1 global telecoms network equipment vendor, boosting its revenue share by a three percentage points last year, according to Dell’Oro Group. Nokia lost one percentage point of revenue share year-on-year, as did Cisco, the latter falling to 6%. Ericsson gained one percentage point to match Nokia at 15% of the market and ZTE also saw a 1% uptick to 10% of the global telecom market. (Please refer to chart below).
Dell’Oro Group’s preliminary estimates suggest the overall telecom equipment market – Broadband Access, Microwave & Optical Transport, Mobile Core & Radio Access Network, SP Router & Carrier Ethernet Switch (CES) – advanced 7% year-over-year (Y/Y) for the full year 2020, growing at the fastest pace since 2011.
The telecom and networking market research firm suggests revenue rankings remained stable between 2019 and 2020, with Huawei, Nokia, Ericsson, ZTE, Cisco, Ciena, and Samsung ranked as the top seven suppliers, accounting for 80% to 85% of the total market. At the same time, revenue shares continued to be impacted by the state of the 5G rollouts in highly concentrated markets. While both Ericsson and Nokia improved their RAN positions outside of China, initial estimates suggest Huawei’s global telecom equipment market share, including China, improved by two to three percentage points for the full year 2020.
Dell’Oro now estimates the following revenue shares for the top seven suppliers:
|Top 7 Suppliers||Year 2019||Year 2020|
Additional key takeaways from the 4Q2020 reporting period:
- Preliminary estimates suggest that the positive momentum that has characterized the overall telecom market since 1Q-2020 extended into the fourth quarter, underpinned by strong growth in multiple wireless segments, including RAN and Mobile Core Networks, and modest growth in Broadband Access and CES.
- Helping to drive this output acceleration for the full year 2020 is faster growth in Mobile Core Networks and RAN, both of which increased above expectations.
- Covid-19 related supply chain disruptions that impacted some of the telco segments in the early part of the year had for the most part been alleviated towards the end of the year.
- Not surprisingly, network traffic surges resulting from shifting usage patterns impacted the telecom equipment market differently, resulting in strong demand for capacity upgrades with some technologies/regions while the pandemic did not lead to significant incremental capacity in other cases.
- With investments in China outpacing the overall market, we estimate Huawei and ZTE collectively gained around 3 to 4 percentage points of revenue share between 2019 and 2020, together comprising more than 40% of the global telecom equipment market.
- Even with the higher baseline, the Dell’Oro analyst team remains optimistic about 2021 and projects the overall telecom equipment market to advance 3% to 5%.
Dell’Oro Group telecommunication infrastructure research programs consist of the following: Broadband Access, Microwave Transmission & Mobile Backhaul, Mobile Core Networks, Mobile Radio Access Network, Optical Transport, and Service Provider (SP) Router & Carrier Ethernet Switch.
Last week, Dell’Oro Group reported that the optical transport equipment revenue increased 1% in 2020 reaching $16 billion. In this period, all regions grew with the exception of North America and Latin America.
“Between concerns on starting new optical builds during the start of the pandemic and aggressive plans on 5G deployments that required a larger share of a service provider’s capital budget, the spending on optical transport dramatically slowed by the end of 2020,” said Jimmy Yu, Vice President at Dell’Oro Group.
“It was a really dramatic drop in optical equipment purchases in the fourth quarter. While we anticipated a slowdown near the end of the year due to concerns around COVID-19, we were surprised by a 29 percent year-over-year decline in WDM purchases in North America as well as a 12 percent decline in China. That said, there was good growth in the other parts of the world, especially Japan,” continued Yu.
|Optical Transport Equipment Market|
|Regions||Growth Rate in 2020|
|Europe, Middle East and Africa||2%|
|Asia Pacific excluding China||13%|
|Caribbean and Latin America||-14%|
The Dell’Oro Group Optical Transport Quarterly Report offers complete, in-depth coverage of the market with tables covering manufacturers’ revenue, average selling prices, unit shipments (by speed including 100 Gbps, 200 Gbps, 400 Gbps, and 800 Gbps). The report tracks DWDM long haul, WDM metro, multiservice multiplexers (SONET/SDH), optical switch, optical packet platforms, data center interconnect (metro and long haul), and disaggregated WDM. To purchase this report, please email firstname.lastname@example.org.
Preliminary estimates by the Dell’Oro Group suggest the overall telecom equipment market advanced 9% Year-Over-Year (Y/Y) during 3Q20 and 5% Y/Y for the 1Q20-3Q20 period. That market includes: Broadband Access, Microwave & Optical Transport, Mobile Core & Radio Access Network, SP Router & Carrier Ethernet Switch (CES).
The analysis contained in these reports suggests revenue rankings remained stable between 2019 and 1Q20-3Q20, with Huawei, Nokia, Ericsson, ZTE, Cisco, Ciena, and Samsung ranked as the top seven suppliers, accounting for more than 80% of the total market. At the same time, revenue shares continued to be impacted by the state of the 5G rollouts in highly concentrated markets.
Huawei and ZTE are both on course to gain two percentage points of market share each this year, at the expense of Nokia, Cisco and Samsung. With investments in China outpacing the overall market, we estimate Huawei and ZTE collectively gained about 3 percentage points of revenue share,” wrote Dell’Oro Analyst Stefan Pongratz in his blog on the matter, implying they actually grabbed around 1.5 percentage points each.
Dell’ Oro estimates the following revenue shares for 2019 and the 1Q20-3Q20 period for the top seven suppliers:
- Following the 4% Y/Y decline during 1Q20, the positive trends that characterized the second quarter extended into the third quarter, underpinned by strong growth in Optical Transport and multiple wireless segments including 5G RAN, 5G Core, and Microwave Mobile Backhaul. Technology segments that were impacted more materially by COVID-19 and the lockdowns during 1Q20 continued to stabilize in the quarter.
- Preliminary estimates indicate increasing Mobile Infrastructure and Optical Transport revenues offset declining investments in Microwave Transport and SP Routers & CES for the 1Q20-3Q20 period.
- The overall telecom equipment market continued to appear disconnected from the underlying economy. While the on-going transition from 4G to 5G is helping to offset reduced capex in slower-to-adopt mobile broadband markets, we also attribute the disconnect to the growing importance of connectivity and the nature of this recession being different than in other downturns improving the visibility for the operators.
- With investments in China outpacing the overall market, we estimate Huawei and ZTE collectively gained about 3 percentage points of revenue share between 2019 and 1Q20-3Q20, together comprising more than 40% of the global telecom equipment market.
- The Dell’Oro analyst team has not made any material changes to the overall outlook and projects the total telecom equipment market to advance 5% to 6% in 2020 and 3% to 4% in 2021. Total telecom equipment revenues are projected to approach $90 B to $95 B in 2021.
Judging from a report by China Daily “China to build 1 million new 5G stations in 2021.” it appears Huawei and ZTE will continue to increase their telecom equipment market share. Reporter Ma Si of China Daily spoke to Wu Hequan, an academician at the Chinese Academy of Engineering, who reckons China will build over a billion 5G base stations next year, taking the grand total to 1.7 million by the end of the year.
China workers working at the construction site of a 5G base station at Chongqing Hi-tech Zone in Chongqing, Southwest China. [Photo/Xinhua]
“As the construction of 5G networks accelerates, the cost of building each 5G base station will go down,” said Wu. “Even if Chinese telecom carriers earmark the same amount of 5G investments in 2022 as they have done this year, they can build far more 5G base stations next year than this year. I believe Chinese telecom carriers will build more than one million 5G base stations next year, though the specific construction targets will have to wait for the telecom carriers’ official announcements.”
China Mobile, China Telecom and China Unicom did not immediately respond to requests for comment from China Daily.
Wu’s remarks are in line with China’s top industry regulators’ predictions the nation will “moderately” push ahead 5G construction in the next few years. The Ministry of Industry and Information Technology said in October as the country is set to enter a lead-in period in the next three years, China will continue to build 5G networks in a rhythm that is moderately ahead of schedule, so the wider coverage of 5G can help promote its use in more industrial and consumer scenarios.
That lead-in period, according to some industry insiders, means new products, new formats and new models of 5G application are constantly emerging and such applications are shifting from single application to large-scale and systemic scenarios.
China seems to be all the more determined to ensure its domestic telecoms industry goes from strength to strength. In response to the threat to the U.S. from China, John Ratcliffe wrote in the Wall Street Journal (on-line subscription required for access): “Beijing is preparing for an open-ended period of confrontation with the U.S. Washington should also be prepared. Leaders must work across partisan divides to understand the threat, speak about it openly, and take action to address it.”
Dell’Oro analysts say first half global telecom equipment [1.] revenues were up 4% YoY in 1st half of 2020, as 5G infrastructure investments offset declines due to the impact of the coronavirus pandemic. The market research firm forecasts a 5% advance for the entire year.
Rollouts of 5G wireless, especially in China, were a primary cause of the first half increases, which benefit the entire supply chain, including telecommunications semiconductors. China 5G spending surely helped Huawei increase its market share, despite U.S. sanctions.
Note 1. Dell’Oro includes the following types in the telecom equipment market: Broadband Access, Microwave & Optical Transport, Mobile Core & Radio Access Network, SP Router & Carrier Ethernet Switch
In the first half of 2020, double digit growth in mobile infrastructure offset declining investments in broadband access, microwave and optical transport and service provider routers and ethernet switches, Dell’Oro said. Statista analysts in June said 2020 telecom equipment revenues should nearly reach $50 billion.
Rankings of the biggest telecom equipment providers remained the same in the first half of 2020, with Huawei dominating at 31%, followed by Nokia and Ericsson tied at 14% each, then ZTE at 11% and Cisco at 6%, according to Dell’Oro.
Second quarter results were stronger than expected following a 4% decline in the first quarter. The biggest driver was a strong rebound in China across 5G Radio Access Network, 5G Core and other areas. Supply chain disruptions of the first quarter also stabilized in the second quarter, Dell’Oro said.
Additional key takeaways from the 2Q20 reporting period include:
- Following the 4% Y/Y decline during 1Q20, the overall telecom equipment market returned to growth in the second quarter, with particularly strong growth in mobile infrastructure and slower but positive growth for Optical Transport and SP Routers & CES, which was more than enough to offset weaker demand for Broadband Access and Microwave Transport.
- For the 1H20 period, double-digit growth in mobile infrastructure offset declining investments in Broadband Access, Microwave and Optical Transport, and SP Routers & CES.
- The results in the quarter were stronger than expected, driven by a strong rebound in China across multiple technology segments including 5G RAN, 5G Core, GPON, SP Router & CES, and Optical Transport.
- Also helping to explain the output acceleration in the quarter was the stabilization of various supply chain disruptions that impacted the results for some of the technology segments in the first quarter.
- Shifting usage patterns both in terms of location and time and surging Internet traffic due COVID-19 has resulted in some infrastructure capacity upside, albeit still not proportional to the overall traffic surge, reflecting operators ability to address traffic increases and dimension the network for additional peak hours throughout the day using a variety of tools.
- Even though the pandemic is still inflicting high human and economic losses, the Dell’Oro analyst team believes the more upbeat trends in the second quarter will extend to the second half, propelling the overall telecom equipment market to advance 5% in 2020.
Semiconductor officials are less optimistic for the rest of the year with SIA President John Neuffer recent saying “substantial market uncertainty remains for the rest of the year.” Semiconductor sales were up 5% in July, reaching $35 billion, but dropped in early August, according to reports.
According to the Semiconductor Industry Association, about 33% of all semiconductors made (the largest category) are devoted to communications, including networking equipment and radios in smartphones.
India based IT services provider Tech Mahindra says it has the capability to build and run an entire 4G or 5G network in India. The company’s partnership with Japanese greenfield telco Rakuten Mobile [1.] will help it get more meaningful business in India’s telecom industry, a senior executive said.
Note 1. Rakuten Mobile, together with NEC, is building a 5G Open RAN and cloud native 5G core network based on their own specifications. Open RAN and cloud native 5G core network are two different and independent initiatives.
“We can build and run an entire 4G and 5G or any enterprise network. We have done that already. We bring to the table our ability to design, to plan, to integrate and deploy and then to manage the entire suite of network capabilities, including designing various parts to it in a disaggregated world,” Manish Vyas – President, Communications, Media & Entertainment Business, and the CEO, Network Services, Tech Mahindra, told the Economics Times of India.
In August, the company announced German telecoms company Telefonica Deutschland had selected it for its network and services operations, in addition to further developing 5G, artificial intelligence, and machine learning use cases.
“We are pleased to announce this partnership with Tech Mahindra. We are supported by a globally experienced service provider to consistently drive forward the development of our network and services operations, thus leading to further enhancement of 5G, artificial intelligence and data analysis use cases,” said Mallik Rao, Chief Technology & Information Officer of Telefonica Deutschland.
“This strategic partnership strengthens our long-standing relationship with Telefonica, in which we support the company in realizing its vision of becoming the ‘Mobile Customer and Digital Champion’ by 2022,” said Vikram Nair, President, Europe, Middle East and Africa (EMEA) of Tech Mahindra.
In October 2019, the company launched a 5G enabled Factory of the Future solution. Nilesh Auti, Global Head Manufacturing Industry unit, Tech Mahindra, said:
“Factory equipment holds a great deal of meaningful data which is key to any successful Industry 4.0 project. Tech Mahindra’s solution in partnership with Cisco, will enable us to leverage this data and empower manufacturers to build factories of the future. As part of our TechMNxt charter we are focused on leveraging 5G technologies to address our customer’s evolving and dynamic needs, and enable them to RISETM.”
Tech Mahindra is also looking for strategic investments and acquisition in companies to further bolster its telecom product and services portfolio. The company says the following about their 5G capabilities and experience:
Tech Mahindra provides range of services that enable enterprises to establish private wireless network to span areas of operations & enable a plethora of IoT use cases. Our services remove inefficiencies related to slow, insufficient wireless connectivity & have a strong roadmap to support growing traffic demands for 5G establishment. From media to medicine we believe 5G is “The NXT of Everything.”
Tech Mahindra ccomplishments listed are these:
- 1M+ carrier grade cellular sites designed, delivered and managed
- Enabling 3 of the first 5 carrier 5G introductions in the world
- Strong Telco partnership/reach (80+ Global Tier 1 Telcos)
- 4 smart cities projects launched, Largest WIFI deployments in the world
- 5 connected vehicles engagements, 40+ Connected factories, 12000+ factory Assets
- 600+ Turbines and 100+ aircrafts connected; 2000+ remote healthcare patients supported
Preliminary estimates suggest 1Q20 revenue shares relative to 2019 revenue shares for the top five suppliers – the latter indicated herein parenthesis – show that Huawei, Nokia, Ericsson, ZTE, and Cisco comprised 28% (29%), 15% (16%), 14% (14%), 11% (10%), 6% (7%), respectively.
Table 1: Telecom equipment market shares
|Vendor||2019 market share||Q1 2020 market share|
|Source: Dell’Oro Group|
Additional key takeaways from the 1Q2020 reporting period include:
- Following two years of consecutive growth in 2018 and 2019, the overall telecom equipment market started the year on a weaker note, reflecting mixed market conditions as the positive market sentiment with mobile-related segments, including RAN and Core, was not enough to offset reduced demand for Broadband Access, Routers and CE Switch, and Optical/Microwave Transport.
- While healthy end-user fundamentals and positive 5G momentum outweighed downward risks associated with the COVID-19 pandemic for both RAN and Core investments, the pandemic had a more material impact on some of the non-wireless related segments, driven partly by supply chain disruptions and weakened demand as a result of increased macroeconomic uncertainty.
- Within the technology segments, Mobile RAN and Core revenues together advanced at a single-digit rate, accounting for nearly half of the overall telecom equipment market during 1Q20. At the same time, the combined revenues for Broadband Access, Microwave Transport, and Routers and CE Switch declined at a double-digit pace Y/Y, accounting for about a third of the overall market.
- In contrast to previous recessions, the COVID-19 slowdown is shifting and transforming the way we use the network. But a shift in how users are consuming data doesn’t necessarily result in a corresponding increase in spending on new infrastructure to support that traffic growth. Some suppliers and service providers indicated that network capacity upgrades were required to accommodate data traffic growth, however, traffic surges did not lead to significant demand for network capacity upgrades across all the telecom equipment segments.
- Even though the pandemic is still inflicting high human and economic losses, the Dell’Oro analyst team collectively expect market conditions and supply chain risks to be more favorable in the second half of 2020, propelling the overall telecom equipment market to advance 1% in 2020, reflecting a downward revision from the previous 2% growth outlook.
Dell’Oro Group telecommunication infrastructure research programs consist of: Broadband Access, Microwave Transmission & Mobile Backhaul, Mobile Core Networks, Mobile Radio Access Network, Optical Transport, and Service Provider (SP) Router & Carrier Ethernet Switch.
Separately, Statista reports that telecom equipment spending is projected to increase from 44.8 billion U.S. dollars in 2015 to around 49.3 billion U.S. dollars in 2020. In 2019, the estimated revenue of the entire global telecommunications industry was US $610.4 billion.
Ericsson, Cisco Systems, Fujitsu, Nokia, NEC Corporation and Qualcomm are the leading telecom equipment companies worldwide. Cisco Systems is the leading Ethernet switch vendor, with more than 50 percent of the market share. Ethernet switches are an important and profitable part of the industry, as they are an integral part of IT infrastructure. They are used to receive, process and transmit data between two devices connected by a physical layer. Together, the top 5 vendors of Ethernet switches generated more than 25 billion U.S. dollars in revenue in 2017. Cisco is also the main vendor of enterprise WLAN, accounting for 45 percent of the global market share. HPE/Aruba, Arris/Ruckus, Ubiquiti and Huawei are also important vendors of enterprise WLAN worldwide.
Ethernet switch, WLAN and telecom towers are only a few examples of telecom equipment. This industry is vast, and includes other important markets such as smartphones. More than 1.5 billion smartphones were sold worldwide in 2017. Samsung, the global mobile market leader since 2012, sold about 20 percent of this total. Apple and Huawei are Samsung’s closest competitors in the market, with around 14 percent and 10 percent of the global smartphone market share respectively.