We just wrapped up the 2Q20 reporting period for all the Telecommunications Infrastructure programs covered at Dell’Oro Group. 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 4% Y/Y for the 1H20 period.

Preliminary readings suggest revenue rankings remained stable between 2019 and 1H20, with Huawei, Nokia, Ericsson, ZTE, Cisco, Ciena, and Samsung ranked as the top seven suppliers. At the same time, revenue shares changed slightly as the Chinese suppliers benefited from large scale 5G rollouts in China.

Revenue shares for the 1H20 period relative to 2019 for the top five suppliers – the latter indicated herein parenthesis – show that Huawei, Nokia, Ericsson, ZTE, and Cisco comprised 31% (28%), 14% (16%), 14% (14%), 11% (9%), 6% (7%), respectively.

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.

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.

Open RAN and virtualized RAN technologies have many of the right ingredients to address both supply and demand related challenges that continue to characterize the mobile infrastructure market.

When it comes to the broader movement behind Open RAN, one of the leading drivers is the degree of competition in the RAN market and the fact that the share of the top 3 RAN suppliers continues to trend upward. With few signs that these revenue share trends are about to reverse anytime soon, Open RAN is increasingly seen as a possible solution to address the reliance on the top 3 and/or to simplify swaps in the event that further consolidation becomes a reality down the road.

 

The momentum is picking up pace, resulting in an improved Open RAN outlook across the globe.

In this latest Open RAN forecast, we project that Open RAN baseband and radio investments—including hardware, software, and firmware excluding services—are projected to more than double in 2020 with cumulative investments on track to surpass $5 B over the forecast period.

 

We attribute the more favorable Open RAN outlook to a confluence of factors including:

1. 

   Verification from live networks the technology is working in some settings;

2. Three of the five incumbent RAN suppliers are planning to support various forms of Open RAN – “Partial Open RAN” (open and virtual but not multi-vendor) are at this juncture captured in the Open RAN estimates meaning we require the first two pillars but we are excluding the third multi-vendor requirement as a necessity to reflect the Open RAN movement;
3. The geopolitical uncertainty has escalated significantly in the past six months, with multiple operators reassessing and/or reviewing their reliance on Huawei’s RAN portfolio, resulting in an improved entry point for the Open RAN suppliers;
4. Progress with full virtualization is firming up, with multiple suppliers announcing the commercial availability of V-RAN, consisting of both vCU and vDU;
5. Operators are increasingly optimistic the technology will move beyond the rural settings for brownfield deployments;
6. Policies to stimulate Open RAN are on the rise.

For more information about the recently published Open RAN and Virtualized RAN forecast, assumptions, and risks, please email us at dgmedia@delloro.com or dgsales@delloro.com.

 

Related Video to the Open RAN Market:

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The global upswing that began in the second half of 2018 has become deeper and stronger. Even with the higher-than-usual degree of uncertainty around the economy, we forecast that the RAN market will grow at a healthy pace over the next three years, before growth tapers off in the outer part of the forecast period, resulting in a mid-single digit CAGR between 2018 and 2022. Cumulative investments over the 2019 to 2024 period are expected to eclipse $200 B.

The main growth drivers have not changed. They include:

(1) A rapid shift toward 5G NR for mobile broadband (MBB) applications, resulting in a condensed deployment phase;

(2) New capex to address IoT, Fixed Wireless Access (FWA), In-building, and Public Safety opportunities for both private and public deployments;

(3) The shift from passive to advanced antenna systems, which will shift capex from the antenna to the RAN market.

The expected impact of these growth drivers has changed. Cumulative revenue projections for the 2019 to 2024 period have been adjusted upward, reflecting more upbeat expectations in China and North America. This in combination with a more favorable outlook for FWA is expected to outweigh downward risks associated with COVID-19 and a pickup in Open RAN—we have adjusted the Open RAN projections upward, with Open RAN now approaching a double-digit share of the overall RAN capex by the outer part of the forecast period. Within the technology mix, cumulative 5G NR RAN revenues for the 2019 to 2024 period have been revised upward while the equivalent LTE capex has been adjusted downward.

Our forecast that 5G NR will be deployed at a faster pace than LTE and surpass LTE in 2021 hinges on a set of key assumptions, including:

(1) The 5G NR mid-band business case for MBB applications remains compelling;

(2) 5G mid-band spectrum will be available sooner than LTE spectrum was made available in the 3G to 4G transition;

(3) New dynamic spectrum sharing technologies will simplify and accelerate the migration from LTE to 5G NR;

(4) Initially 5G will be just another G, but long-term it will be more than another G, even if it takes time to reach the full potential of 5G;

(5) Complete 5G systems to address new use cases will be deployed gradually, at a slower pace than Sub 6 GHz MBB 5G NR.

Regional projections have been adjusted to reflect some COVID-19 related near-term slowdown in late majority MBB regions, including Europe, Latin America, parts of Asia Pacific (APAC), and parts of Middle East & Africa (MEA). While the CAGR is fairly flat in most regions, the capex envelope within the forecast period is expected to vary across the regions.

Risks are broadly balanced. The geopolitical uncertainty could trigger more government stimulus than we have currently considered to support network swaps and other forms of tax policies to improve the staying power of non-Chinese vendors.

Taking into consideration that significant changes in GDP resulted in material RAN changes with a roughly one-year lag in the 2001 and 2008 recessions, and that we are modeling 2021 to be a growth year, the baseline projections rest on the assumption that there will be some downward push over the short-term in the less advanced MBB markets. At the same time, we anticipate the upside driven by the 5G rollouts in the advanced markets will ultimately outweigh the downward adjustments, implying that the extent of the projected growth will appear disconnected from the underlying economy.

Other takeaways from the July 5-Year RAN Forecast include:

• The Millimeter Wave outlook has been revised upward driven by improved momentum in the Asia Pacific region.
• The pickup in mid-band deployments has propelled the demand for Massive MIMO. In this forecast, 5G NR Massive MIMO is projected to comprise more than half of the cumulative 5G NR capex.
• The underlying assumptions driving the regional projections remain fairly unchanged, with the APAC region being the main near-term growth vehicle.
• With more clarity about the 5G rollout plans in the North America region, we have adjusted the near-term outlook upward and now forecast the North American RAN market to continue advancing over the near-term.
• Global macro base station (BTS) shipments are projected to remain elevated between 2020 and 2022, underpinning projections that 5G activity is set for an upturn. This positive momentum will eventually slow, resulting in some softness in the outer part of the forecast period.
• The high level small cell vision has not changed. We expect unlicensed WiFi systems to coexist with cellular technologies. For upper mid-band deployments, operators will need to accelerate indoor deployments rapidly while the sub 6 GHz micro adoption phase will be more gradual.
• Since the last forecast, we have adjusted the outdoor small cell outlook upward, driven primarily by a more favorable Millimeter Wave forecast.
• 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 technology advancements, and improving market sentiment for both basic and high performance connectivity

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 5GNR, 5G NR Sub 6 GHz, 5G NR mmW, LTE, LTE FDD, LTE TDD, WCDMA, and GSM pico, micro, and macro transceiver base stations. The report also include splits for macro and non-residential small cells and Massive MIMO. Click here to learn more about the report or contact us (dgsales@delloro.com) for the full report.

 

With 5G deployments now accelerating at a torrid pace and 5G NR investments projected to comprise 30% to 50% of global RAN investments in 2020 (Dell’Oro Group), operators are reassessing how to optimize their spectrum resources to capitalize on the potential business and technology benefits with 5G NR. Many countries are realizing the strategic importance of timely 5G deployments spurring governments and regulators to actively release/award 5G spectrum. Even with some minor spectrum auction delays as a result of Covid-19, countries that have auctioned or plans to award sub 6 GHz spectrum by year-end 2020 together comprise nearly 90% of worldwide GDP. At the same time, the amount of spectrum and the type of spectrum that is available varies widely across the globe, prompting operators to effectively capitalize on their respective spectrum assets to build 5G networks with optimal experience.

One of the more compelling features with 5G in addition to the increased spectrum bandwidth that comes with the upper mid-band and the mmW spectrum is the fact that 5G NR offers spectral efficiency improvements on a like for like basis relative to LTE, implying that operators and eventually enterprises can take advantage of these efficiency benefits regardless of their current spectrum portfolio. And in contrast to previous mobile technology transitions, new technologies such as dynamic spectrum sharing, dual connectivity and carrier aggregation across multiple technologies will provide the necessary tools to simplify and accelerate the migration from LTE to 5G NR. This improved flexibility taken together with the efficiency and performance upside with 5G NR plays an important role in the improved market sentiment that has characterized the RAN market in this initial 5G mobile broadband (MBB) deployment phase. While having the right mix of spectrum remains extremely important, the relatively seamless transition enables operators to put parts of the spectrum to use today. It does not matter if the spectrum is optimized for coverage or better suited for capacity or if an operator has a non-ideal portfolio mix of low-band, mid-band, or high-band spectrum. With 5G, operators now have the tools to capitalize on the benefits with the respective bands and put together a roadmap that migrates the portfolio in various phases from legacy 2G-4G to 5G NR.

Massive MIMO configured TDD based systems accounted for the lion share of the 2019 5G NR market (Dell’Oro Group), underpinning projections that the current outdoor macro grid in combination with Massive MIMO delivers favorable RAN economics for operators with the appropriate spectrum.

Meanwhile, multiple indicators suggest that that the interest for FDD based 5G NR deployments are on the rise, reflecting not only surging demand from operators with insufficient upper mid-band spectrum but also a shift in the overall attitude towards FDD based 5G NR deployments. Operators are starting to realize that the FDD spectrum will play an increasingly important role to help the operators achieve nationwide footprints rapidly and benefit not only from the marketing upside inherent with nationwide 5G but also the spectral efficiency and overall performance gains in both the UL and DL. During Huawei’s virtual 2020 HAS event, Huawei share data suggesting FDD based UL signal to spectrum in combination with C-band TDD spectrum for the DL would result in a 7 to 8 dB UL coverage extension and improve the overall UL user experience three-fold to four-fold, addressing shortcoming with relying completely on TDD. And more importantly, for operators that are seeking to use 5G to propel the use cases beyond MBB, this FDD coverage layer will play an important role simplifying and accelerating the transition toward 5G SA and potentially open up a wide range of new opportunities with non-traditional use cases. Per Dell’Oro Groups 5-Year RAN Forecast, FDD based 5G NR investments are projected to advance 5x to 10x over the next five years.

One of the reasons this shift from 4G to 5G has accelerated at a much faster pace than initially expected is the fact that operators can for the most part leverage their existing macro grid, which has been a major benefit both from a time-to-market and TCO perspective as it reduces the need to add more outdoor sites to realize 5G NR coverage that is equivalent to the outdoor sub 3 GHz LTE coverage. This model of adding new technologies to the existing sites at a faster pace than legacy technologies are sunset will naturally complicate the situation as the sites are becoming increasingly crowded. Although suppliers have invested heavily to address some of the short comings at the site with more power efficient systems and smaller form factors to manage the challenges with adding both Massive MIMO and non-Massive MIMO configured systems, there is more work to be done.  For this approach to succeed at scale, the suppliers need to continue innovating and focus on the underlying site challenges with simplified site solutions that reduces and consolidates the amount of equipment at the cell site, reduces the size and weight of the equipment where possible, and minimizes the overall power consumption.

Given that there is a strong correlation between network services requirements and mobile broadband investments for the more simplified site deployments, this on-going shift towards multi technology sites including both legacy technologies and more complicated 5G solutions that could involve dynamic spectrum sharing and beamforming addressing a wider scope of use cases spanning across potentially multiple industries in combination with the increased site complexity and the need to focus on energy optimization will accelerate the shift towards more intelligent planning/design, operations and predictive analysis.

In other words, everyone wants more spectrum. But until then, efficient spectrum management, simplified site solutions, and more intelligence to navigate the increased site complexity will go a long way for operators seeking to maximize the efficiency of current spectrum assets while at the same time laying the basic foundation for taking 5G to the next level.