2018 - Page 2 of 3 - Dell'Oro Group

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.

Related links:

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:

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.

FWA and eMBB will dominate the 5G NR capex over the near-term

There were no major changes to the timeline we communicated during the July 5-year RAN Forecast — Fixed Wireless Access (FWA) and enhanced mobile broadband (eMBB) are expected to characterize the 5G NR market over the near-term (Figure 1). From a 3GPP standards perspective, low-latency IoT will be addressed in R16 and should be a reality by the 2020 time-frame. But from an adoption perspective, the URLLC use case will likely not be a reality until the 2022 time period.

5G NR eMBB is coming in faster than expected

The overarching takeaway from the show was that the 5G NR eMBB use case is happening at a faster pace than what was originally envisioned. Even with the improved visibility a year ago, the momentum has accelerated. To be clear, the shortened deployment scheduled was already factored into our July 5-year forecast — commercial 5G NR eMBB RAN revenues are still slated for 2H18 and projections are not being revised upward at this juncture. However, feedback from both the supply and demand side during the MWC Americas event added confidence to the forecast we had previously communicated.

The eMBB business case will be driven by cost, capacity, and marketing

The general sentiment at the show was that the 5G NR business case is straight forward from a capacity and cost perspective. From a capacity point of view, there is room left in the tank with LTE utilizing existing resources including carrier aggregation, higher order QAM, Massive MIMO, CBRS, and LAA. The amount of spare capacity will differ from operator to operator depending on the state and utilization of the network and the corresponding spectrum assets.

Nokia presented some rather detailed and interesting models during the MWC event suggesting the average LTE network in the US will run out of capacity by 2022. This is relatively consistent to our own internal findings. Per the July 5-year RAN forecast, we are modeling 5G NR capex in the North America region to be material in 2019 already — 5G NR is expected to account for a significant portion of the 2018-2022 capex in the NA region. In addition to the cost and capacity drivers, the forecast assumes marketing will play an important role accelerating the 5G momentum.

There are multiple aspects to consider from a marketing perspective, including: 1) timing of the first commercial 5G network, 2) timing of nationwide 5G coverage, and 3) advertised data throughputs. As all the Tier 1 operators in the US now have plans to ensure the 5G logo will show up on smartphones nationwide by 2020/2021 using the 600 MHz, 2.5 GHz, Band 5, and Band 66, the focus is increasingly shifting towards the speed component.

mmW and CBRS stimulating enthusiasm for FWA

Consumer mobile is the cash cow but the upside is also limited spurring carriers to balance their investments between the known and unknown opportunities. Not surprisingly, FWA was a hot topic during the MWC event reflecting progress with both the CBRS and mmW spectrum. Factoring in the general industry sentiment towards mmW solutions, Verizon’s 300 Mbit/s announcement for home applications was a positive surprise. Admittedly the advertised speeds were a bit higher than we expected as well. There are still multiple technical and business related hurdles before Verizon can consume a large portion of the fixed home/enterprise market. In addition to propagation challenges as a result of obstacles in the path, technicians are still required to install the home CPE -– a significant cost and time burden.

In addition to providing fiber-like speeds using the mmW spectrum, the CBRS band will play an important role connecting the unconnected and improving the competitive landscape for DSL type services. Federated Wireless recently announced that FWA applications is one of the main drivers of the 16 K CBRS ICDs (Initial Commercial Deployment). And during MWC, AT&T outlined plans to leverage the CBRS spectrum with possible commercial FWA deployments in late 2019.

Competitive landscape will vary depending on the frequency range and country

There is a confluence of variables that could impact the competitive dynamics in the US and globally. There are now more signs that ZTE ban and increased security concerns will impact the 5G NR landscape. Discussions at the show suggest at least one major European operator is looking into phasing out ZTE. Regardless of what the motivations were behind the ZTE ban, one of the implications is that the global 5G NR aspirations for all the vendors need to be aligned with the current geopolitical climate.

Please contact Daisy Kwok (daisy@delloro.com) for full access to this blog.

On Tuesday, June 26, I presented a webinar introducing the 802.3bt™ Power over Ethernet (PoE), hosted by Dell’Oro Group and Ethernet Alliance. Chad Jones with Cisco and David Tremblay with HPE were my partner speakers at this webinar.

PoE has already become the go-to for devices requiring low-voltage power. Coupled with emerging Internet of Things (IoT) devices like security cameras, medical devices, LED lighting, and more, the PoE application space is booming. With the ratification of IEEE 802.3.bt™ getting closer, the “Introducing IEEE 802.3bt™ Power over Ethernet” Webinar offers clarity on what to expect from this innovative technology.

To recap this webinar, we talked about:

What is Power Over Ethernet?
What are the different classes and types and how they all work together?
What are the different applications and devices driving PoE requirement?
How big is the PoE market opportunity from a device perspective?
How big is the PoE market opportunity from a switching perspective?
How many PoE switch ports do we expect over the next five years?
What are the new PoE requirements of new devices and how are the PoE requirements of traditional devices changing?
What are the new features and the new power levels of IEEE 802.3bt™?
Importance of interoperability testing and certification

Need a refresher? Missed the webinar? Click this link to watch the webinar recording.

I hope you can find this webinar valuable to you and get a lot out of it.

Enjoy!