Open RAN investments surged in the first quarter of 2021. Preliminary estimates suggest total Open RAN revenues – including O-RAN and OpenRAN compatible macro and small cells radios plus baseband hardware and software – increased around five-fold year-over-year. The uptake is uneven. In this blog, we will discuss four Open RAN related key takeaways with the 1Q21 quarter including 1) The Asia Pacific (APAC) region is driving the market, 2) Macro is dominating but small cell adoption is improving, 3) The Open RAN Massive MIMO landscape is evolving, and 4) Short-term outlook remains favorable.

The operators in the APAC region are largely behind the surge, underpinned by a fairly synchronized migration from proprietary RAN towards Open RAN in Japan. In addition to Rakuten, which now has some 50 K radios up and running, other Japanese operators are increasingly optimistic about O-RAN and the role open interfaces will play with more advanced radio deployments.

 

 

Not surprisingly, macro deployments are dominating the Open RAN revenue mix both globally and in APAC, reflecting the state of the overall RAN market and the current focus by operators deploying Open RAN. This is also consistent with our own projections and the recently released Open RAN Technical Priorities Summary by the larger European telcos, suggesting Macro RAN is the primary target for the operators.

At the same time, Open RAN small cell activity is on the rise. Helping to drive this acceleration is faster growth with millimeter wave (mmWave) deployments in Japan, with multiple operators now embracing the benefits of combining the higher spectrum with the sub 6 GHz bands.

The traditional top 5 RAN vendors (Huawei, Ericsson, Nokia, ZTE, and Samsung) are dominating the $10 B+ Massive MIMO RAN market, however, Open RAN proponents remain optimistic the recent uptick in O-RAN related announcements will eventually lead to an improved supplier landscape. Predicated on the assumption that the shift towards wider bandwidths will be a catalyst for 5G SA, the asynchronous availability of the upper mid-band spectrum offers a window of opportunity for new entrants.

In other words, even if the Massive MIMO market is relatively mature and highly concentrated, it is not too late for suppliers with weaker RAN shares to use O-RAN combined with SA to enter this segment. And the number of suppliers that want to seize on this opportunity to bolster growth is increasing with multiple smaller non-top 5 RAN suppliers – including Airspan, Fujitsu, Mavenir, and NEC – announcing the availability or upcoming GA of O-RAN Massive MIMO antenna systems. And with the silicon providers also ramping up investments to accelerate the shift towards advanced Open RAN radios, we do expect this non-top 5 supplier O-RAN Massive MIMO list to evolve over time.

Since more operators are suggesting performance parity with “traditional systems” is expected, new Massive MIMO entrants know what they need to deliver in terms of IBW, weight, size, TRX configurations, power consumption, and spectral efficiency. In other words, the bar is high and it will continue to rise. So no one is under the impression this will be a trivial task. But at the same time, the Open RAN community has received the message loud and clear – broader Open RAN adoption is to some degree hinging on the success of Massive MIMO.

With the strong showing in the first quarter, we are adjusting the short-term outlook upward and now project total Open RAN revenues to nearly double in 2021. And while we are not revising the long-term Massive MIMO Open RAN projections at this time, we will of course continue to monitor the situation closely to better understand how the growing ORAN ecosystem will impact the overall vendor dynamics.

For more information about the Open RAN and Virtualized RAN forecast and assumptions, please visit our Open RAN page or please email us at dgmedia@delloro.com or dgsales@delloro.com.

 

Huawei recently held its annual analyst event. Even though we were not able to attend in person, it was an informative event. Below we will discuss some of the RAN-related takeaways touching on 6 GHz and general FDD trends.

6 GHz

Current sub 6 GHz 5G NR deployments utilizing both the FDD bands and the upper mid-band will go a long way in addressing continued data traffic growth. At the same time, the upside is limited and will likely not be enough to meet the capacity demands of the next decade, and as a result, both suppliers and operators are assessing their capacity roadmaps. Operators have three basic tools at their disposal to manage traffic growth including leveraging more efficient technologies, deploying more cells, and using more spectrum. So in addition to increasing the reliance on small cells, operators will from a licensed spectrum perspective have three high-level options once the upper mid-band has been exhausted including maximizing efficiency with the FDD spectrum (using 8T8R and/or Massive MIMO), deploying millimeter wave (mmWave) systems, and using the upcoming 6 GHz spectrum.

Given the lack of tools in the toolkit and the overlap on the demand side, operators and regulators typically converge towards similar approaches when it comes to balancing ROI and spectral efficiency. It is not a coincidence that operators increasingly rely on 4T4R radios to build the LTE base layer with FDD networks or that 64T64R became the de-facto configuration for operators with larger swaths of upper mid-band assets.

Yet for some reason, there is not much consensus when it comes to optimizing the use of the 6 GHz spectrum (5.925-7.125 GHz). China appears to favor licensed 5G for the entire 6 GHz spectrum, while the FCC and MSIT have made the decision to make the entire 1200 MHz of spectrum in the 6 GHz available for unlicensed use. Other countries/regions and the GSMA are considering a more balanced approach between the unlicensed and licensed spectrum, allocating possibly up to half or 600 MHz for licensed use. According to a GSMA survey, 90% of MNO’s responses placed the 6425-7125 MHz as a high priority for IMT.

To be fair, it is not trivial. On the one hand, Wi-Fi is a major success story and it remains the de-facto indoor connectivity technology for enterprises and consumers. And the unlicensed spectrum is increasingly congested. Meanwhile, mobile data traffic continues to grow at an unabated pace and there are few signs that traffic growth will slow enough to obviate the need for a more valuable spectrum.

Huawei is a strong proponent of using a more balanced approach with the 6 GHz spectrum. And during HAS2021, Huawei shared some preliminary and rather insightful findings from early tests that could prove to be extremely valuable for other countries that have not finalized their 6 GHz plans.

Huawei estimates that the 6 GHz spectrum could deliver 10x of incremental capacity relative to the C-band with similar coverage using higher-order MIMO and more antenna arrays. In other words, preliminary findings suggest technology advancements can compensate for the 9 dB delta between 3.5 and 6 GHz and ultimately enable operators to reuse a significant portion of the existing macro grid without compromising coverage.

And it is more than a PowerPoint. Initial tests using 5 macro sites in Hangzhou support the premise that the 6 GHz spectrum can achieve similar coverage as the C-band. Huawei has been working on prototypes and 6 GHz trials will be conducted in China during 1H21 to verify coverage, capacity, and coexistence interference. Field tests for the 6425-7125 MHz spectrum will also be conducted in Russia during 2H21.

These developments could turn out to be a game-changer not just for the operators but also for the suppliers because it would create another major macro 5G wave with potentially millions of advanced Massive MIMO systems deployed after the 64T64R and 32T32R upper mid-band rollout phase.

The initial 6 GHz Massive MIMO prototype is fairly large now, however, Huawei remains optimistic that the form factor will improve. Keeping in mind that Huawei and Ericsson now offer TDD Massive MIMO products in the 20 kg range, down from ~40 kg in just a few years, we don’t have too many reasons to doubt this assumption. Commercial products and deployments could be a reality by the 2023-2025 time frame, aligned with the WRC-23 6 GHz IMT identification.

In other words, the technology progress remains on track. Unfortunately, there is still some risk that the decisions made by some countries to allocate all of the 6 GHz spectrum for unlicensed use could impact the momentum and the ecosystem. More countries will finalize their 6 GHz plans in 2021. Hopefully, these preliminary findings will help regulators make data-driven decisions and ultimately optimize the use of the 6 GHz spectrum for both outdoor and indoor environments.

FDD Improvements

In addition to the potential upside with the upper mid-band and the 6 GHz spectrum, operators will continue to improve the efficiency with the FDD spectrum. Upgrading the sub 1 GHz sites to 4T4R will help to improve the experience by ~80%. Furthermore, Huawei estimates operators can squeeze another ~1.7x of capacity by upgrading the 2 GHz base layer from 4T4R to 8T8R. This combined with FDD Massive MIMO (~3x to 5x relative to 2T2R) will provide the carriers with a solid near-term and long-term FDD capacity roadmap for the sub 1 GHz and 2 GHz spectrum.

Huawei’s FDD portfolio and roadmap align well with its vision for this spectrum. It is also consistent with our projections. We still believe it is unlikely that FDD Massive MIMO will become the base layer and instead anticipate these will be deployed in hotspots along with an upgraded base layer. Though of course, it is worth reminding everyone that the consensus three to four years ago was that TDD Massive MIMO would only make sense in hotspots.

In short, some of the keys RAN takeaways from Huawei’s 2021 HAS event are consistent with the message that we have communicated for some time, namely that the overall 5G RAN capex cycle will be longer and steeper than the 4G cycle, underpinned by multiple asynchronous 5G waves including: (1) sub 1 GHz NR; (2) upper mid-band Massive MIMO; (3) 2 GHz 4T4R; (4) 8T8R and FDD Massive MIMO; (5) 6 GHz NR; and (6) mmWave.

With 5G coverage rapidly expanding around the globe and 5G eMBB driving the lion’s share of the 5G capex, the time is right to start looking beyond the typical MBB connectivity scenario. One of the technologies that is slowly making a bit of a comeback and is expected to play a growing role in the 5G evolution roadmap is positioning. While the concept of using positioning with wide-area cellular or low-power unlicensed technologies to improve location accuracy is far from new and has been around for decades, the combination of the performance and reliability improvements with NR and the growing enthusiasm with vertical opportunities for both IoT and MBB applications that could benefit from precision level accuracy forms the basis for the renewed interest with 5G positioning.

What is so exciting about 5G positioning? The enhancements available with 5G NR Release 16  will deliver significant performance improvements relative to previous cellular technologies and meet the initial baseline requirements of 3 meters and 10 meters for indoor and outdoor horizontal accuracy (80% of the time), respectively.  Vertical accuracy is also improved.

 

And while we don’t know what the world will look like ten years from now, we do know that the requirements for many of the industrial and manufacturing use cases will vary widely in terms of accuracy, reliability and latency. Taking into consideration that the RF carrier bandwidth and the subcarrier spacing impact the overall accuracy, the inherent flexibility with both the 5G NR bandwidth (≤100 MHz vs. ≤ 20 MHz with LTE) and the subcarrier spacing (15 kHz, 30 kHz, 60 kHz, 120 kHz with NR vs 15 kHz with LTE) provides the right foundation and agility to address diverse end user requirements beyond the baseline criteria.

In addition, 5G positioning technologies will address energy improvements to ensure support for a wide range of terminal form factors with differing battery capacity requirements. Per 3GPP service 1, 5G systems with positioning technologies should be able to allow the UE to operate for at least 12 years using less than 1800 mWh of battery capacity, assuming multiple position updates per hour.

Another important component with 5G positioning is the accuracy improvements with moving objects. The value with 5G positioning when combined with GNSS systems could be compelling for vehicle management and V2X applications, to name a few use cases. The 3GPP specification suggests 5G systems shall support a mechanism to determine the UE’s velocity with an accuracy that is better than 0.5 m/s for the speed, with a positioning service availability of 99%.

 

5G Positioning Roadmap towards LPHAP

The 3GPP roadmap is continuously evolving to fulfil the overall 5G vision. The schedule for 3GPP Release 15 included three separate steps: early drop focusing on NSA option 3, main drop focusing on SA option 2, and late drop focusing on completion of 4G to 5G migration architectures.

While MBB is dominating the capex mix in this initial 5G phase, the 3GPP roadmap is evolving to address opportunities beyond MBB.

Release 16, also known as 5G Phase 2, was completed in July 2020. The high level vision is that Release 16 will provide the initial foundation to take 5G to the next level beyond the MBB phase, targeting broad-based enhancements for 5G V2X, Industrial IoT / URLLC, and NR-U, including 5G positioning. Though positioning was addressed using LTE overlay with Release 15, Release 16 defines a new dedicated positioning reference signal leveraging various techniques involving both multi-cell and single-cell positioning.

Release 17 is currently slated for early-2022 and will provide more enhancements to realize the full 5G vision, extending operations up to 71 GHz and include enhancements to IoT, Massive MIMO, and DSS, and positioning, with precise indoor positioning providing accuracy in the sub-meter level combined with battery life improvements. LPHAP, known as Low Power High Accuracy Positioning, is the latest work item accepted by 3GPP to specify requirements and standardize low power high accuracy technologies for positioning terminals and services in industrial IoT scenarios.

 

5G Positioning Architecture

In order to improve the performance with 3GPP Release 16, new positioning reference signals (PRS) and a new location management function (LMF) were added to the specification.

 

5G IoT Market Status

With IoT accounting for about 1% to 2% of total mobile operator revenues, it is still early days in the broader IoT transition. At the same time, IoT revenues are now growing at a faster pace than non-IoT revenues, reflecting improved adoption over the past couple of years since 3GPP started addressing low-power technologies.

The 5G IoT market is even more nascent but with standards evolving to support new features such as 5G positioning including precise indoor positioning, 5G and private spectrum becoming available, an ecosystem that is accelerating, and signs of activity picking up pace as new use cases are emerging, future prospects remain favorable.

And more importantly, we don’t need to wait for the future to prove this thesis. Preliminary feedback from trials is positive, bolstering the narrative that low power technologies coupled with high accuracy positioning (LPHAP) could play a growing role in the broader 5G IoT market supporting a wide range of applications including hospital asset management, airport equipment scheduling, and manufacturing AGV and material management, to name a few.

In short, the typical eMBB use case is driving the capex today. Vertical activity remains subdued but is on the rise and new enhancements to the 5G roadmap including improved location accuracy with precise indoor functionality and improved energy characteristics could play a role expanding the opportunities with new use cases.

We recently updated the 2020 Telecom Capex Report. In contrast to the standard Dell’Oro equipment reports that track manufacturing revenue for telecommunications infrastructure, the capex report analyzes the investment plans for around ~50 operators, accounting for approximately 80% of worldwide capex and revenue. Now given that the sum of the SP telecom equipment programs we closely track – including Broadband Access, Microwave & Optical Transport, Mobile Core & Radio Access Network, SP Router & Switch – accounts for about a third of the overall capex, it can be inferred that small changes in non-equipment related capex can impact the relationship between the overall capex and equipment rather materially. Having said that, the correlation between the equipment programs and telecom capital intensities remain significant over time. And even if the tracking is not always perfect and capex is just one piece of the forecasting puzzle, we believe there is value to analyzing these trends.

Some of the highlights from the 2020 Capex report are shown below. For more information or if you need full access to the report, please contact Daisy@delloro.com.

• Following three years of declining capex trends between 2015 and 2017 and flat trends in 2018, preliminary readings suggest that worldwide telecom capex—the sum of wireless and wireline telecom investments—advanced at a low single-digit rate in 2020, recording a second year of consecutive growth.
• Preliminary equipment vendor report estimates indicate that the combined revenues of the carrier-related equipment programs tracked by the Dell’Oro Group (Broadband Access, Microwave Transport, Mobile Core Network, Mobile RAN, Optical Transport, and SP Routers & Switches) increased approximately 7% Y/Y in 2020, suggesting that the relationship between carrier capex and supplier infrastructure equipment revenues decoupled somewhat, partly reflecting the site utilization reuse rate with 5G.
• Following the 3% Y/Y revenue contraction for the 1H20 period, preliminary readings indicate that worldwide telecom revenues bounced back in 2H20.
• We have revised our short-term and near-term capex outlook upward, reflecting a more favorable outlook in Europe, Japan, and the US. Total wirelines plus wireless telecom capex is now projected to advance more than 5% in 2021.

• Even as the 5G BTS installed base in China approached 0.8 M in 2020, preliminary guidance for the top 3 operators combined with initial estimates for CBN suggests the positive momentum that has characterized the Chinese market over the past two years, following steep declines between 2015 and 2018, will extend into 2021.
• With capex projected to outpace revenue growth over the near-term, the combined capital intensity is expected to increase in 2021 and 2022, before stabilizing and improving in the outer part of the forecast period

About the Report:

The Dell’Oro Group Telecom Capex Report provides in-depth coverage of more than 50 telecom operators highlighting carrier revenue, capital expenditure, and capital intensity trends.  The report provides actual and 3-year forecast details by carrier, by region by country (United States, Canada, China, India, Japan, and South Korea), and by technology (wireless/wireline).  To purchase this report, please contact by email at dgsales@delloro.com.

 

We just wrapped up the 4Q20 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 7% year-over-year (Y/Y) for the full year 2020, growing at the fastest pace since 2011.

The analysis contained in these reports suggests revenue rankings remained stable between 2019 and 2020, with Huawei, Nokia, Ericsson, ZTE, Cisco, Ciena, and Samsung ranked as the top seven suppliers, accounting for 80% to 85% of the total market. At the same time, revenue shares continued to be impacted by the state of the 5G rollouts in highly concentrated markets. While both Ericsson and Nokia improved their RAN positions outside of China, initial estimates suggest Huawei’s global telecom equipment market share, including China, improved by two to three percentage points for the full year 2020.

 

 

We estimate the following revenue shares for the top seven suppliers:

Source: Dell’Oro Group

Top 7 Suppliers	Year 2019	Year 2020
Huawei	28%	31%
Nokia	16%	15%
Ericsson	14%	15%
ZTE	9%	10%
Cisco	7%	6%
Ciena	3%	3%
Samsung	3%	2%

 

Additional key takeaways from the 4Q20 reporting period include:

• Preliminary estimates suggest that the positive momentum that has characterized the overall telecom market since 1Q20 extended into the fourth quarter, underpinned by strong growth in multiple wireless segments, including RAN and Mobile Core Networks, and modest growth in Broadband Access and CES.
• Helping to drive this output acceleration for the full year 2020 is faster growth in Mobile Core Networks and RAN, both of which increased above expectations.
• Covid-19 related supply chain disruptions that impacted some of the telco segments in the early part of the year had for the most part been alleviated towards the end of the year.
• Not surprisingly, network traffic surges resulting from shifting usage patterns impacted the telecom equipment market differently, resulting in strong demand for capacity upgrades with some technologies/regions while the pandemic did not lead to significant incremental capacity in other cases.
• With investments in China outpacing the overall market, we estimate Huawei and ZTE collectively gained around 3 to 4 percentage points of revenue share between 2019 and 2020, together comprising more than 40% of the global telecom equipment market.
• Even with the higher baseline, the Dell’Oro analyst team remains optimistic about 2021 and projects the overall telecom equipment market to advance 3% to 5%.

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.