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Favorable prospects for the telecommunications equipment market

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The growth expectations of the world market for telecommunications equipment are very favorable for the coming years. The global telecommunications equipment market increased 7% last year, the highest since 2011, and by 2021 the consultancy Dell’Oro expects growth of 3-5%, due to continued investment in 5G networks. Huawei will continue its upward march, with 32% of the total market, more than Nokia and Ericsson, which will retain 15% each, the consultancy calculates.

The global market for telecommunications equipment, comprising fiber optic and microwave broadband transport and access networks, mobile access networks (RAN) and in the core (Core) and routers and switches, was between the 90,000 and 95,000 million dollars last year, according to provisional figures prepared by Dell’Oro Group, the most respected consultancy in this segment of activity. If their forecasts are confirmed, this year the equipment market will be in the order of 100,000 million dollars in round numbers.

Mobile telephony networks, including those for radio access and transport in the core of the network, account for a little more than half of this total, while broadband data transport networks by cable, fiber optics and Microwaves, including switches and routers, represent the other half of the pie. This distribution shows the great importance that mobile telephone networks represent for the telecommunications sector as a whole.

Huawei maintains its dominance in the global telecommunications equipment market, with 32% of the total, more than Ericsson and Nokia combined, and increases its share by two points in 2020

Throughout the second half of the last decade, the market for mobile telephony networks experienced a stagnation, or a very slight rise, due to the fact that the bulk of investments in 4G networks had already been made and prices in units fell as technology matures. Last year, with the initial rollout of 5G networks, the mobile network market captured all of the growth estimated by Dell’Oro at 7%, an increase that had not been recorded since 2011, when the massive rollout of networks began. 4G.

The world market for telecommunications equipment is fully controlled by Huawei, which accounts for no less than 31% of global turnover, almost a third of the total. Last year, despite the US veto, which was followed in part by several European and Southeast Asian operators, its share increased from 28% in 2019 to 31% in 2020, always according to Dell’Oro. It is followed by the two large European groups, Nokia and Ericsson, which each achieved a 15% share. Nokia’s share fell one point last year, while Ericsson’s rose one point, technically tied. Between the two, however, they did not reach Huawei’s turnover.

No change in the positions of the big seven

The positions of the seven major global suppliers of telecommunications equipment were unchanged over the past year. Behind Huawei, Nokia and Ericsson, ZTE is in fourth place, achieving a 10% share, one point more than in 2019, and is far behind the remaining three, Cisco, Ciena and Samsung. Cisco, once the king of network routers and switches, maintains a respectable 6% share, although it loses a point. Ciena maintains its global 3% share and Samsung drops to 2%, as Dell’Oro maintains in its statement. https://www.delloro.com/key-takeaways-total-telecom-equipment-market-2020/


Evolution of the global market for telecommunications equipment

In the graph above, it can be seen that, although the order of the world’s seven major telecommunications equipment manufacturers has not changed in the last seven years, their relative position has altered substantially. The leap experienced by Huawei in recent years, and especially in 2019 and 2020, when it grew much more than the rest is obvious in the graph.

Also striking is Nokia’s smooth but steady decline throughout the decade, which has caused the nearly four margin points that separated it in 2014 from Ericsson to evaporate in 2020. Also relevant is the rise recorded by ZTE in the middle of the last decade, which later dropped a bit when 4G was fully mature, to later go back up to 5G slipstream.

The evolution of the four main telecommunications equipment manufacturers in recent years has its clearest cause in the sale of access networks (RAN), first 4G and towards the end of the last decade 5G. Nokia had a very high participation in the transport networks, which it has maintained to some extent, but the greater weight of the mobile networks has hurt it.

Nokia made a strategic technology mistake a few years ago when 5G technology was brewing. Nokia thought that 5G would not begin to be deployed until the beginning of this decade and developed its RAN equipment based on chips built with programmable logic networks, more expensive but with greater possibilities of change when the standard was fully set with respect to the other alternative, the measurement chips, which the rest of the manufacturers opted for. When it was finally decided to accelerate the roll-out of 5G with the approval of 5G link networks over 4G transport networks (known as 5G Non Stand Alone), Nokia found the step changed: its 5G NSA equipment was competitive in benefits but not in price. The bet that Nokia once made has meant a significant loss of market share in the global RAN market, which the new CEO is trying to reverse. Two years after the first 5G NSA networks began to be commercialized, the deployment of 5G SA networks, fully 5G, is beginning.

China’s leadership benefits Huawei

The other key to what happened is in the huge bet that China has made with 5G, relying, it is evident, on its national suppliers, Huawei and ZTE. South Korea also did the same with its national champion Samsung, but the size of the Korean market, although it would have been completely monopolized by Samsung, which has not been the case, is far less than the Chinese, so that Samsung can barely have 2 % of the world telecommunications market, slightly more than in the middle of the decade. This year, with the contract won for the next five years with Verizon, the US operator, it is foreseeable that Samsung’s presence in the global mobile phone market will increase a little more.

The sales of 5G equipment in China by Huawei and ZTE, and to a large extent in Southeast Asia, have allowed these two Chinese suppliers to grow almost fifteen points of participation in the world market for telecommunications equipment and from three to four points only in 2020. From about 20% of share that Huawei had in 2014, it has jumped in 2020 to 32%, according to Dell’Oro, while ZTE has gone from 8 to 10% approximately. If in the middle of the last decade ZTE was about ten points behind Ericsson or Nokia in the mobile market, now it is less than five points from the Swedish and Finnish manufacturers.

The brutal deployment of 5G networks in China in 2020, which will continue this year, explains the leadership that Huawei continues to hold and reinforces the position of its compatriot ZTE, which achieves 10% compared to 15% of Ericsson and Nokia

The announced ban on buying Huawei 5G equipment by some countries, especially Great Britain and Australia at the behest of the United States, which was no longer buying, has caused Huawei to lose approximately two points of share in the international market for telecommunications equipment. , but that has been more than offset by the booming Chinese 5G market, in which only Ericsson is present among foreign suppliers thanks to the supply competition achieved a few months ago with China Mobile.

Radio access networks, main market

Radio access networks (RAN) are the main market within telecommunications equipment, which has grown the most in recent years and will continue to do so in the next five years, Dell’Oro adventure. That is why there is so much talk about RAN, closed or open, and that the United States has turned a large part of its foreign trade policy into trying that, at least, Huawei does not maintain its dominance in this key market, because it is the gateway to all mobile phone networks.

5G networks have contributed a lot to the growth of link networks in the last two years, mostly 5G in advanced countries, and will continue to do so in the next five years. The migration from 4G to 5G is being much faster than expected by all consultancies, including Dell’Oro, despite the commercial success of the new 5G networks, especially in the West, leaves much to be desired. The explanation that Dell’Oro makes to justify this high growth in the 5G RAN market comes from the demand side of the operators because they consider that 5G will allow them to reduce the costs per gigabyte transmitted in their mobile phone networks, although for the moment They cannot affect this increase in traffic in a higher price of the service.

The lack of sufficient 5G coverage, networks that are not totally 5G but a hybrid 4G and 5G (NSA) and that 4G already reaches a speed more than enough for most users explains that 5G passes for the moment without pain or glory . Operators trust that when there is good 5G coverage, especially in cities, in the 3.5 GHz medium band and all networks are 5G SA, which will also coincide with a much higher park of 5G compatible smartphones, the revenues that 5G operators will receive will be higher.

 


Average annual RAN market estimate, in billions of dollars. Source Dell’Oro (March 2021).

The consulting firm Dell’Oro estimates that the average turnover of the RAN market in the past decade was about 31,000 million dollars and in this five-year period that began in 2020 it will rise to 35,000 million dollars. Link networks will continue to represent about a third of the global equipment market, which gives an idea of ​​how strategic link networks are, previously 4G and now 5G.

Continued dominance of the Asia Pacific region

The Asia Pacific region will continue to be by far the most important RAN market in this five-year period. Dell’Oro estimates that more than 50 million 5G base stations will be installed in the region, adding macro and micro. Investments in millimeter wave networks, above 6 GHz, will also grow a lot, but especially in the second half of this decade, because now all operators, except the American Verizon and AT&T due to lack of spectrum, are focused on installing 5G link networks in the low bands, from 700 to 1,500 MHz, and in the middle, around 3.5 GHz.

The US pressure on Western economies and some of Southeast Asia, such as Taiwan or Australia, have allowed the share of Ericsson and Nokia in the 5G link network market to grow significantly, especially in the last quarter of 2020, and both companies will top the list of 5G RAN sales outside of China. Dell’Oro estimates that Ericsson achieved 35 to 40 percent of the 5G RAN market outside of China and Nokia 25 to 30 percent over the past year, outperforming Huawei.

It should be borne in mind, however, that the RAN market in China was far superior to all the rest last year, almost four times more. According to some calculations, China installed about 800,000 5G base stations in its territory while in the rest of the world it barely reached 200,000 units.

However, the influential The Wall Street Journal, which is generally fair in its section of printed news, swept home the headline that “Huawei market share falls in the international equipment sector” and assure in the first paragraph that ” Huawei Technologies lost ground last year to its Western rivals in the mobile equipment market outside of China, according to a consulting firm [Dell’Oro], a sign that the US campaign to take down the Chinese manufacturer is starting to wind down. have its impact ”.

In the second paragraph, it reported that Huawei’s market share of mobile equipment outside of China fell two percentage points, to 20%, while Ericsson and Nokia solidified their dominance outside of China with 35% and 25%, respectively. , earning two Ericsson points and one Nokia, which is true. It is not until the sixth paragraph, out of a total of eleven in its printed edition of March 8, that it says that Huawei is the world’s leading manufacturer of mobile equipment when figures from China are included and that its sales grew last year. But without mentioning at any time that Huawei has about a third of the world market, more than its rivals Ericsson and Nokia combined, which does not leave the impartiality, in this specific case, of the American newspaper in a good position. The information, however, is not signed by the newspaper’s technology specialists Dan Gallagher or Jacky Wong, but by correspondents in London and Hong Kong.