Below is a shortened version of some RAN related key takeaways from Huawei’s Mobile Broadband Backhaul (MBB) event, Ericsson’s Capital Market Day, and Nokia Global Analyst Forum. For access to the full blog, please contact Daisy@delloro.com

Forecasts are being adjusted upward

Based on some of the findings below, revised vendor projections, and the fact that the market recovery has become broader and stronger (RAN revenues accelerated at the fastest pace in 3Q18 since 2014), it is increasingly likely we will adjust total RAN (2G+3G+4G+5G) and 5G NR projections upward in conjunction with the January 5-Year RAN Forecast Report.

5G MBB business case is clear

With mobile data traffic still growing at an unabated pace—per Ericsson’s latest Mobility Report, mobile data traffic increased close to 79% YoY in 3Q18, recording the strongest growth since 2013—one of the overarching themes from multiple analyst events is that the 5G NR eMBB business case is obvious. Even the more conservative operators are now on board with regard to the 5G business case for eMBB applications—no one is asking anymore whether there is a business case for using more spectrum and utilizing it more efficiently.

5G MBB momentum is accelerating

Not only is 5G ready sooner than anyone expected, the momentum is still accelerating. In addition to the early adopters in Australia, China, Japan, Korea, U.S., and the Nordic countries, there are multiple signs that even the larger European carriers are planning to deploy 5G NR at a faster pace than originally envisioned. And with the trials in China being so large already, the Chinese operators will be able to accelerate commercial deployments rapidly when they are given the green light.

To be clear, 5G NR for MBB is materializing at a faster pace than most everyone expected. At the same time, 5G for Critical IoT / Ultra-Reliable Low Latency Communications (URLLC) is progressing in line with or at a slower pace than initial expectations.

Mid-band to drive MBB, mmW is on the rise

C-band and the 2.6 band are emerging as the global mid-bands.

Millimeter wave (mmW) technology has gone through different phases, with the general industry sentiment shifting from being very optimistic about 5G mmW four to five years ago, followed by increased skepticism and dampened projections for a couple of years, and now in 2018 it appears that the expectations for mmW are rising again. We also adjusted our mmW projections upward in conjunction with the July 5-year forecast update. There is a confluence of factors behind the renewed mmW optimism…

The business case for mid-band Massive MIMO is improving

Deploying 5G NR in the mid-band spectrum using the existing macro grid will yield the best ROI for operators seeking to increase the capacity and improve the average speeds for MBB applications. Given the different…

FWA RAN is growing—but still small relative to total RAN

With more than 200 networks worldwide using LTE to connect the unconnected, Huawei estimates about…

People are needed to deploy the equipment

While AI and automation will play an important role in managing the increased site complexity, a human being still has to climb the tower and install the equipment. According to Ericsson

Excitement for IoT is growing

Massive IoT (mMTC) is driving the lion’s share of the IoT market today. But there is excitement forming over the Critical IoT (URLLC) use case which includes Industry 4.0. Vendors are forming partnerships and creating special BUs to prepare for this opportunity.

While there is no shortage of IoT and URLLC skeptics, vendors and operators are excited about the fact that the industry is moving from talking about various use cases to solving real problems. Nokia recently announced that it is working with ABB to demonstrate how URLLC can help to clear faults quickly for medium-voltage distribution networks. The leading suppliers are teaming up with operators and car manufacturers to carry out C-V2X demonstrations. The list of course goes on—Ericsson estimates there are more than…

Build it and they will come

This was a phrase Huawei used during its MBB summit, and since we agree with the general concept we thought it is appropriate to reuse. The underlying premise here is that we have now talked about the various 5G use cases for some time. And as much fun as it is to use Excel and PowerPoint to model the business cases for the unknown IoT use cases that are nearly impossible to predict, the technology is now ready and the time has come for action. Just like the operators are able to use their LTE MBB networks to minimize and justify the investments for NB-IoT and LTE-M, operators can leverage their NR MBB networks to minimize URLLC investments. One of the challenges with the URLLC networks is…

RAN product announcements to accelerate rapidly in 2019

There is no one-size-fits-all solution. On the contrary, the sites are getting more complicated because they not only need to support the new 5G NR systems, but they also need to coexist with existing legacy base stations. The C-band spectrum will vary by country. Site and load requirements will also vary depending on the country, but in general it is safe to assume that operators will need more capacity, wider bandwidth radios, smaller form factors, lighter products, and more energy efficient systems. Based on various announcements, the accelerating shift toward 5G, and the fact that the existing macro site will yield the best ROI, it is safe to conclude that RAN product announcements will accelerate at an explosive pace in 2019:

  • During Huawei‘s MBB Summit, the vendor announced a massive number of new products, spanning across its entire RAN portfolio, aimed at giving customers the capacity and RF performance they need while at the same time addressing the site challenges discussed above.
  • Ericsson announced during its capital market day that it is planning to introduce more than 100 radio products in 2019—that is not a typo, more than 100 radios.
  • Nokia’s ReefShark chipset remains on track for the Massive MIMO antennas, digital front ends, and the baseband resulting in smaller antennas, improved power and cost optimization, and flexible baseband.

NBASE-T technology is significantly impacting the market with the biggest transition we’ve seen in campus switching since 2000.

That’s a bold statement backed up by data and trends we’ve noted in our extensive research in the campus network market. With the new generation of 802.11ax access points supporting NBASE-T ports, this trend will only accelerate. At Dell’Oro Group, we predict a major refresh of the Ethernet Switch Campus market as 802.11ax shipments ramp up, taking NBASE-T to 20 percent of campus switch ports by 2022.  This transition will enable enterprises to transform their networks, support new high bandwidth devices, and provide the “always on” network experience expected today.

One clear example of this growth is in the education market. One administrator we spoke with said they are seeing big differences in their freshman class use even from one year to the next. Each incoming class is taking a step up. They use to plan their network needs based on 3 devices per student, and that has jumped to 5 devices per student in just the past couple years. Devices like Amazon Alexa and gaming devices have become even more prolific, and the number of users has also jumped from 10K to 22K in that same timeframe.

Members of the Dell’Oro Group team including Tam Dell’Oro, Ritesh Patel and myself, recently discussed these findings in a webinar with Peter Jones of the NBASE-T AllianceNBASE-T Campus Network Market Update from Dell’Oro Group includes significant data points, price trends and discussion on the mix between 2.5GE/5GE. Decision makers can use this information to inform their strategic infrastructure plans and purchases.

Dell’Oro Group reports provide more in depth findings on Campus Networks – Wired and Wireless reportEthernet Switch – Campus report, and Wireless LAN report.

We see 802.11ax driving the continual growth and expansion of NBASE-T adoption in a vast range of markets. From the high end to the low end of the market, there is a broader range of product offerings happening in a shorter time frame than with most previous technologies. Across the industry, NBASE-T technology is clearly powering a major inflection point in campus networking.

Last week, Dell’Oro Group hosted a webinar with the NBASE-T Alliance about recent Campus Network updates.  Spearheaded by users’ need for mobile connectivity everywhere, wireless LAN deployments are heralding in NBASE-T, particularly with the availability of the newest 802.11ax access points. Yet early indicators reveal that 802.11ax adoption is not following historic patterns.

Three disruptions are unfolding:

  • 802.11ax access points will have an amplified impact on the Ethernet network as they connect into the Ethernet network with two ports rather than the traditional one port. One of the Ethernet ports will be either 2.5 Gbps or 5.0 Gbps. This will have a cascading effect through the network.
  • The price premium for 802.11ax will be significantly lower than previous technologies. This suggests that adoption may be faster.
  • China may not lag adoption.

Enterprise class 802.11ax access points with NBASE-T shift wireless LAN from being cannibalistic to Ethernet Switch market sales

The rate of migration of enterprise users away from desktop PCs to laptop and/or tablets has slowed. Some applications and functions, such as CADCAM, and laboratory work are most efficient on desktop PCs. Annual desktop PC shipments appear to be stabilizing.

Most Wireless LAN deployments now expand, rather than replace, the Ethernet network. Through our end-user interviews, Dell’Oro Group learned that the majority of wireless LAN deployments are in areas where Ethernet never existed, such as common areas in the Education sector, public areas in government buildings, museums, and shopping malls.

Wireless LAN access points have reached a significant level—annual shipments worldwide are in the tens of thousands of units—and they all need to connect to the Ethernet network.  This has driven Ethernet switch port shipments. Previews of 802.11ax access-point configurations indicate that a single port of NBASE-T will be incorporated at all price points, from the highest end to the lower-mid-range products with one port 5.0 Gbps at the high end and 2.5 Gbps into the lower-mid-range products.  We estimate that these segments capture approximately 50% of the market volume.  1 Gbps Ethernet will be the secondary port on high- and-mid-range product, and will dominate the low-end access points.

Wireless LAN will become an accelerator

As wireless LAN access points connect into the network at 2.5-and-5.0 Gbps, switches in the next layer of aggregation will likely need to be replaced with higher speeds.  This will cause a cascade effect through the network.  NBASE-T currently commands a price premium over 1 Gbps, which will have an accelerating effect on switch sales.

The penetration rate of 802.11ax will be much faster than previous technologies

Manufacturers are launching mid-range to lower-range 802.11ax products in addition to high-end.  This contrasts with the product launch plans of previous technologies such as 802.11ac and 802.11n.  The implications are much wider range of products will be available and price sensitive users will enter the market sooner.  The price premium will be lower on the 802.11ax technology vs. 802.11ac.  As a result, we predict 802.11ax will have a faster market penetration.

In our next blog, we’ll continue to explore another disruption – China may not lag adoption.

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The Huawei Connect 2018 was held in Shanghai on October 10 to 12 and over 20,000 attendees from different countries were at this event. It was a fascinating week led by Huawei key leaders sharing their Artificial Intelligence (AI) strategy along with its vision of an AI powered intelligent world.  For this event, I was looking forward to seeing how Huawei is transforming itself from primarily a provider of IT hardware solutions, to a provider of full-stack cloud services and applications.

Given that my interest lies in the areas of compute, server network connectivity, and cloud data center infrastructure, here are my main takeaways from the event:

AI Chips: Huawei launched the Ascend 910 and Ascend 310 at Huawei Connect 2018, aimed at accelerating AI workloads. The Ascend 910 is designed for the core data center, whereas the Ascend 310 is suitable for low-power edge computing. Both chips are designed by Hisilicon, a company owned by Huawei.  The Ascend announcement is groundbreaking because this is a rare instance in which a manufacturer is able to launch a viable alternative to accelerated processors, such as the GPU from NVidia, or FPGA from Intel or Xilinx, for AI workloads. Google, through its huge engineering resources, have also deployed its own accelerated processor, called the TPU, in its data centers. However, Huawei claims that a cluster of Ascend 910 can even outperform a comparable pod of TPU3, by a factor of 2.5X in floating point operations. More importantly, this is the first time in which a Chinese manufacturer has developed a seemingly competitive accelerated processor, and is aligned with China’s long-term goal of becoming self-reliant in the IT hardware market.  I believe the inclusion of another silicon vendor for accelerated chip sets, especially a foreign one, will drive additional innovation and adoption for AI technologies.

Smart NIC: Huawei announced a Smart NIC with an ASIC, also powered by Hisilicon, for applications such as offloading TCP/IP from the CPU. Initially this Smart NIC will likely be deployed in Huawei’s own cloud servers, but could eventually be sold alongside Huawei’s compute and storage portfolio to Huawei’s enterprise customers.  The Smart NIC market started to heat up in 2018 with no fewer than six major network adapter vendors, such as Intel, Broadcom, Mellanox, announcing or qualifying new products.  Smart NIC deployment is currently still fragmented and limited only to several hyperscalers.  I question whether or not the benefits Smart NICs could outweigh its high price premium and power consumption, which are factors inhibiting more wide-spread deployment of Smart NICs in the data center. However, Huawei’s vertical integration efforts might justify the economics of deploying Smart NIC in its cloud data centers.

Cloud Infrastructure: Huawei has been ramping and advancing its infrastructure to better compete against other public cloud providers, such as Alibaba Cloud. Currently, Huawei operates data centers worldwide, and is in the process of developing state-of-art modular data centers with redundant availability zones, and to optimize utilization and improve efficiencies.  In terms of absolute scale, Huawei has a long ways to go before catching up to other hyperscalers in terms of capacity.  However, I believe that Huawei is in a strong position to grow its public cloud business given the company’s penetration in enterprise accounts, and the only vendor to have an integrated cloud platform, from accelerated processors, to a global network of cloud data centers.

While the adoption of AI technologies is still nascent, its growth has been explosive with numerous potential applications that could change our daily lives.  Smart NIC is another area in which I am closely tracking.  It remains to be seen whether or not Huawei’s internal development of its Smart NIC will pay off and drive a strong use case.  For the next Huawei Connect event, I am looking forward to advances in the development and deployment of Huawei’s own silicon solutions in the fabric of Huawei’s future generation of data centers.

To learn more about my current market research coverage:

Read articles Baron Fung has written or been featured in…

I attended the MEF18 conference this week in Los Angeles and had the opportunity to meet and interact with key industry stakeholders and experts.  I was also a judge for the 2018 MEF Awards.  This year, MEF announced the availability of a draft technical specification for SD-WAN service standardization. Through my SD-WAN market research, I have seen the SD-WAN ecosystem expand so rapidly over the past several years. On one hand, SD-WAN’s popularity is driving great innovation, but on the other hand, it is creating an overcrowded and confusing market place. It is good to see MEF getting behind SD-WAN service standardization, as this is the type of work needed to smooth out the challenges of deploying SD-WAN services and to accelerate the service adoption. There is a lot of work to be done on SD-WAN service standards, but we will be watching the progress with great interest.

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