Post-Pandemic Work from Anywhere and Digitization Initiatives to Fuel Strong Demand

We just published the latest edition of our 5-year forecast for the Network and Security and Data Center Appliance (NSDCA) Market that spans Firewalls, Secure Web Gateways, Email Security, IDS/IPS, Application Delivery Controllers, and Web Application Firewalls. A year ago, we debated the effects of the US and China relationship and Brexit on the market, but this year all attention is on the COVID-19 pandemic. The pandemic is reverberating through the market with both near-term and long-term consequences.

Near-term, we see overall NSDCA market growth muted that will only attenuate as societies turn the corner on the pandemic. We forecast the market will post meager growth of just 2% year-over-year (Y/Y) in 2020. Historically, the total market has been averaging 7% to 9% Y/Y growth. Fortunately, we believe the market will begin reverting to more robust growth in the latter half of 2021 as vaccination against COVID-19 ramps up.

We project post-pandemic growth to be stronger than what we predicted pre-pandemic in January 2020 and rise from $17.6B in 2020 to $28.8 B in 2025, representing a 10% five-year compound annual growth rate. The key difference from a year ago is the pandemic’s expected long-term effects on how businesses operate:

  • The Work Anywhere Workforce – The pandemic substantially increased the ranks of teleworkers as many people worked from home in compliance with state and local government health mandates. While some workers are beginning to return to corporate offices, we believe that many will continue to telework post-pandemic, whether full- or part-time. According to our analysis relying on US Bureau of Labor Statistics data, 10% of the US workforce worked remotely pre-pandemic. We anticipate that post-pandemic, 20% of the total US workforce will work remotely. On a global scale, we foresee similar dynamics.
  • The Fully Digital, Multi-cloud, Mobile user-friendly Enterprise – The pandemic forced businesses from paperwork and handshakes to digital documents and online transactions. While the multi-year journey of enterprises to be fully digital was well underway before the pandemic’s arrival, it accelerated upon its onset. We see this momentum continuing post-pandemic.

Though a rising tide lifts all boats, in our report, we dig into the details on how cloud-friendly technologies will rise faster than on-premise technologies post-pandemic.  For example, the Firewall segment, representing over 50% of the overall market, is not expected to match our pre-pandemic forecast. We do expect the Firewall segment to rebound, but not as strong as other segments. The Firewall segment has traditionally been biased towards physical appliances and on-premise corporate deployments.  We see physical appliances playing a shrinking role in the market as enterprises move to virtual and software-as-a-service embodiments.

Delll'Oro Group Network Security and Data Center Appliance 5-Year Forecast ReportAbout the Report

The Dell’Oro Group Network Security & Data Center Appliance market 5-Year Forecast Report offers a complete overview of the industry with tables covering manufacturers’ revenue for Firewall, Secure Web Gateway, Email Security, IDS/IPS, Application Delivery Controller, and Web Application Firewall product segments. Each of these segments is further split by Physical, Virtual, and SaaS (Software-as-a-Service) form factors. Manufacturers’ units shipped and average selling price is provided for the Firewall and Application Delivery Controller segments. To purchase this report, please contact us by email at dgsales@delloro.com.


Subscriber and Bandwidth Growth Will Remain Key Catalysts

Global spending on broadband access equipment and CPE is expected to drop only 2% in 2020, a significant improvement from our July 2020 forecast, which anticipated spending dropping by 7% in 2020. The combination of significant residential subscriber growth and increased capacity utilization rates noted by global broadband providers nearly offset the negative impacts of trade tussles, component shortages, and labor limitations.

In the first half of 2020, we heard from countless service providers that their projected capacity utilization rates for the entire year were reached by March or April. A second surge in consumption in the fall, driven by children returning back to school and attempts at re-opening economies forced many operators to add even more capacity. With much of the world still dealing with the impacts of the COVID-19 pandemic and with remote work and online education continuing well into 2021, we see no slowdown in broadband capacity utilization, forcing service providers to once again balance accommodating traffic growth with managing overall spending. Continuing RAN investments will force service providers to spend judiciously on their broadband networks. In certain cases, this will mean delaying longer-term strategic projects and focusing on addressing immediate capacity upgrades and onboarding a higher-than-average volume of new subscribers.

PON Equipment Spending Expected to Remain Solid

Our five-year CAGR for PON equipment has been increased to 3% from just under 1%. China, which has historically accounted for anywhere from 65-80% of total PON spending, has peaked in terms of total ONT units consumed on an annual basis. The Chinese FTTH market has matured, with broadband penetration in the country reportedly nearing 80%. Though subscriber growth is slowing, there is still a tremendous installed base of subscribers that will continue to require new ONTs.

Although China’s ONT volumes are coming down from the peak years of 2017 and 2018, additional growth is expected from the rest of the world—particularly North America and Western Europe. In North America, the FCC’s $20B RDOF (Rural Digital Opportunity Fund) program will help transition a significant number of rural areas to fiber over the next 5-7 years. In Western Europe, major operators including Orange, DT, BT OpenReach, and Proximus are all expanding their fiber rollouts and even moving quickly to XGS-PON for symmetric 10 G services.

Finally in Asia, India, Indonesia, and Malaysia, along with a 10 G upgrade cycle in Japan and South Korea should also help sustain the market.

Cable Infrastructure Spending Set for Growth

The glut of DOCSIS channel capacity that helped push down cable equipment revenue in 2018 and 2019 was actually beneficial to operators in 2020 as they were able to address significant increases in both upstream and downstream traffic during the pandemic with minimal increases in spending. In most cases, cable operators used the software tools available as part of DOCSIS 3.1 to ensure adequate bandwidth for all subscribers. In other cases, operators purchased additional DOCSIS licenses as part of accelerated node split programs to address systems with the greatest need.

Regardless, after two years of under-investing in infrastructure, the overall cable infrastructure market will see a steady increase in revenue throughout our forecast period, as mid- and high-split projects in North America and Western Europe, designed to increase upstream capacity, are accelerated. Investments in outside plant equipment, particularly new amplifiers and taps, will also continue as operators begin the multi-year process of preparing their networks for DOCSIS 4.0 and its ability to enable extended spectrum DOCSIS (ESD), low-latency DOCSIS, and full-duplex DOCSIS (FDD).


About the Report

The Dell’Oro Group Broadband Access  and Home Networking 5-Year Forecast Report provides a complete overview of the Broadband Access market with tables covering manufacturers’ revenue, average selling prices, and port/unit shipments for Cable, DSL, and PON equipment. Covered equipment includes Converged Cable Access Platforms (CCAP), Distributed Access Architectures (DAA), DSL Access Multiplexers (DSLAMs), PON Optical Line Terminals (OLTs), Customer Premises Equipment ([CPE] for Cable, DSL, and PON), along with SOHO WLAN Equipment, including Mesh Routers. For more information about the report, please contact dgsales@delloro.com.


Dell’Oro Group published an update to the Optical Transport Five-Year Forecast report in January 2021

Although we continue to be concerned with the high level of uncertainties that exist due to the COVID-19 pandemic, we believe that the Optical Transport market will maintain its positive momentum for the next five years. This long term outlook is based, fundamentally, on the belief that bandwidth demand will continue to increase for many more years in the future as it has for the past decade—one that included the start of a pandemic.

This of course does not mean the Optical Transport market will grow unencumbered for the next five years. Because while bandwidth demand continues to grow, we anticipate the Optical Transport market will face challenges such as the three outlined here:

  • When WDM technology reaches Shannon’s Limit, it will be increasingly difficult to drive down the average price-per-bit of bandwidth by increasing spectral efficiency. Yet, we forecast the average price-per-bit will decline at the same rate in the next five years as it did in the past five years.
  • The entry of coherent 400 Gbps in a small form factor pluggable such as QSFP-DD opens the door for a change in architecture to IP-over-DWDM and away from traditional Optical Transport systems. Component manufacturers have already been trialing and sampling 400ZR pluggable optics in late 2020, and we think demand will be material by late 2021.
  • In the past five-year period, much of the Optical Transport market growth was due to a couple high growth markets—China and data center interconnect (DCI). However, as history has proven many times, markets do not stay at a high growth rate forever. Will this be the case for China and DCI as well?

But even with these market challenges, we are optimistic about the future of Optical Transport and believe that the market for optical gear will rise for many more years. In this latest January 2021 publication, we are forecasting that the cumulative Optical Transport market revenue will be nearly $85 billion for the years that include 2021 through 2025.

Our growth projections are driven by the anticipated need for WDM systems in both metro and long-haul applications, which combined is expected to comprise nearly 98 percent of the total Optical Transport equipment market.

Within the WDM market, we expect the continuous drive to higher wavelength speeds to occur. Hence, while 100 Gbps coherent wavelengths contributed the majority of revenue before, we forecast the largest contributor will be 200 Gbps in the near term period, and then 400 Gbps in the outer forecast period. In all, we are forecasting 200+ Gbps wavelength shipments to grow at a five-year CAGR of 30 percent.


About the Report

The Dell’Oro Group Optical Transport 5-Year Forecast Report offers a complete overview of the Optical Transport industry with tables covering manufacturers’ revenue, average selling prices, unit shipments, wavelength shipments (by speed up to 1.2 Tbps). 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. Click here to learn more about the report or contact us at dgsales@delloro.com.


Dell’Oro Group published an update to the Microwave Transmission & Mobile Backhaul Transport Five-Year Forecast report in January 2021

The following are key takeaways from the newly released report:

    • We remain concerned about the COVID-19 pandemic, and believe it will continue to influence the mobile backhaul and microwave transmission markets this year, as it did throughout 2020. If additional lockdowns do occur, we expect that similar to last year supply-chain issues will cause a slowdown in deployments. Also, as a result of the pandemic’s damage on the 2020 world economy, we remain concerned that a second recession could occur in 2021 or 2022, depending on government economic policies this year. That said, we are optimistic that as COVID-19 vaccines are distributed, service providers will find the confidence to invest in their networks.
    • For the cumulative five-year forecast period that includes 2021 through 2025, we predict the Mobile Backhaul Transport market revenue, consisting of fiber/copper and wireless systems, to be $25 billion. During this period, the cumulative Microwave Transmission market revenue, driven mostly by mobile backhaul, is expected to be just over $16 billion.
    • We expect the rollout of 5G to be the main driver of market growth for both the Mobile Backhaul Transport and Microwave Transmission markets. We estimate that 67 percent of Mobile Backhaul Transport revenue and nearly half of Microwave Transmission revenue will be generated from equipment deployed in 5G networks by 2025. In addition to backhaul, we believe 5G will increase the use of Fronthaul.
    • With each generation of mobile radio technology, the use of Fiber/Copper Systems for Mobile Backhaul Transport has increased, and naturally, we predict this share will continue to rise with 5G deployments. Therefore, we forecast Fiber/Copper System shipments to exceed those of Wireless Systems throughout the forecast period. However, the increasing use of Fiber/Copper as a share of link shipments will likely plateau at approximately 70 percent since many operators will still rely on Wireless Systems such as point-to-point Microwave Transmission.
    • The Microwave Transmission market is forecast to grow at a low single-digit percentage rate for the next five years. We predict that Packet Microwave will be the only microwave transmission technology segment that grows over the next five years, driven by rising demand for full outdoor units and E/V Band systems. We forecast Packet Microwave revenue to grow at a 10 percent CAGR.
    • E/V Band system sales have been relatively modest but steadily rising in use. Due to higher capacity requirements for 5G and spectrum constraints on lower frequency bands, we expect growing demand for E/V Band systems. Therefore, we forecast annual E/V Band shipments to more than triple by 2025.
About the ReportDell'Oro Group Microwave Transmission and Mobile Backhaul 5-Year Forecast January 2021

The Dell’Oro Group Microwave Transmission and Mobile Backhaul 5-Year Forecast Report offers complete, in-depth coverage of the market with tables covering manufacturers’ revenue, ports/radio transceivers shipped, and average selling prices by capacities (low, high and E/V Band). The report tracks point-to-point TDM, Packet, Hybrid Microwave as well as full indoor and full outdoor unit configurations, Mobile fronthaul and backhaul, 5G backhaul, and Fiber/copper and wireless. To purchase this report, please contact dgsales@delloro.com.

With the overall RAN market now growing at the fastest pace in nearly ten years and on track to approach revenue levels not seen since the Chinese operators rolled out 3G, one of the fundamental questions is simply whether there is more room to grow with this elevated baseline, keeping in mind the historically tight coupling between RAN revenue and wireless capital intensity. And if so—where will this growth come from?

We believe that there is room for expansion over the near term as the early adopters continue to roll out 5G at an extraordinary pace. The shift from 4G to 5G is accelerating at a torrid pace and much faster than expected. This is not because operators expect to raise ARPU or because they are anticipating significant near-term revenue upside from new applications. Instead, the main driver is on the supply side, and the ability of the operators to reduce cost-per-bit and to differentiate on the packaging with larger data plans.

After the RAN market reaches a new all-time high, we project that total RAN revenues will give up some gains in the post-peak MBB rollout phase. At the same time, we are anticipating a somewhat less severe pullback relative to the contractions following the 3G and 4G peaks in China.

While some deviation in the capital intensity ratio is expected in the peak coverage rollout phase, this forecast, with the post-peak pullback projected to approach two-thirds of previous declines, rests heavily on the assumption that the aggregate upside of these smaller non-traditional growth opportunities driven by new fixed and enterprise capex will curb the downside somewhat in the outer part of the forecast.

The main reason we remain excited about the opportunities ahead, even if we are still operating in uncharted economic territories, is the fact that the somewhat tepid high-level outlook is masked by all the ongoing parallel efforts taking place in addition to the shift from 4G to 5G, opening up opportunities for both the incumbents and new entrants.

Other takeaways from the January 2021 5-Year RAN Forecast include:
  • The Asia Pacific region is expected to dominate the overall RAN revenue mix.
  • Total macro and small cell radio shipments are projected to surpass 50 M over the forecast period.
  • mmWave investments are growing rapidly, with total mmWave RAN revenues on track to more than double by 2025.
  • Fixed Wireless Access (FWA) Radio Access Network (RAN) investments, including mobile network and dedicated fixed networks, are projected to comprise a growing share of the overall RAN capex envelope over the next five years, reflecting the size of the potential upside, various technological advancements, and improving market sentiment for both basic and high-performance connectivity.
  • Private wireless RAN revenues are still small relative to overall MBB investments but activity is on the rise, underpinned by a new spectrum, an improving device ecosystem, technology improvements, and the emergency of new use cases that require cellular QoS.
  • Open RAN is here to stay. Total Open RAN revenues are projected to account for more than 10% of the 2025 RAN market.


About the Report

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, transceivers or RF carrier shipments, unit shipments for 5G NR Sub 6 GHz, 5G NR mmW, and LTE macro and small cells. The report also include projections for Massive MIMO and Open RAN. Click here to learn more about the report or contact us (dgsales@delloro.com) for the full report.

Dell'Oro Group RAN Market 5-Yr Forecast Report Jan 2021