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.

 

The Massive MIMO RAN market – which includes baseband and radio revenues for large-scale antenna systems featuring > 8T8R sub 6 GHz LTE and NR radio configurations – ended the year on a high note, with full-year Massive MIMO RAN revenues more than doubling in 2020 propelling global transceiver shipments to approach the 0.1 B to 0.2 B range.

Not surprisingly, Massive MIMO-based technologies are power the vast majority of the 100+ commercial 5G networks. And more than 75% of the 0.2 B+ 5G subscriptions by year-end 2020 utilized the upper mid-band.

 

 

Helping to explain this output acceleration is the exceptionally robust 5G Massive MIMO growth in the Asia Pacific (APAC) regions, driven by large-scale deployments in China, elevated investments in Korea, and improving trends in Japan. And even though narrow-band NR has been the main focus for the leading US operators, T-Mobile’s wide-band 5G NR network covered roughly a third of the population by the end of 2020.

Even with the elevated baseline, we believe market conditions remain favorable. Global Massive MIMO growth is expected to tick up at a double-digit pace in 2021, underpinned by continued investments in the leading 5G markets and improving Massive MIMO coverage with the early majority segment – the GSA has identified 220 operators in 63 countries/territories with the right spectrum assets to deploy LTE or NR based Massive MIMO systems.

And equally important, the vendors continue to innovate and come up with incremental advances, improving the form factor, weight, performance, cost, and price. Just this past week, Samsung announced enhancements that will improve the Massive MIMO throughput by up to 30%. And Ericsson’s latest AIR 6419 64T64R radio weighs just 20 kg (200 MHz BW, 320 W). It was just two years ago at MWC 2019 in Barcelona when the same product configurations were in the ~40 kg range. Huawei also announced a new Massive MIMO radio weighing only 19 kg, down from 25 kg just last year, though it is not entirely clear from the announcement if we are comparing apples-to-apples with the Ericsson solution. Regardless, the suppliers clearly understand the role that Massive MIMO is already playing and will continue to play to optimize the overall TCO per capacity.

In short, 2020 was a phenomenal year for Massive MIMO, and we remain excited about the short-term and near-term prospects and will continue to monitor the market and vendor dynamics. For more information about our Massive MIMO coverage, please see the quarterly RAN and 5-Year Forecast RAN reports.

The Service Provider Router market—which includes Core, Edge, and Aggregation segments—held up reasonably well in 2020 despite the macroeconomic turmoil caused by the COVID-19 pandemic. Large-scale network operators, whether they be telecom, cable MSO, or cloud service providers, pulled back on some infrastructure investments, but on the whole, continued to add capacity to their networks to meet the expanding traffic loads. The worldwide SP Router market declined just one percent in 2020.

In our new 5-year forecast report, we are predicting that the worldwide SP Router market will resume growth in 2021 and continue to expand annually through 2025. To be clear, the SP Router market is a mature one, and our projected compounded annual growth rate (CAGR) in the low single-digits reflects the state of the market. Nonetheless, there are some clear opportunities for growth with emerging technologies and the evolution of network architectures. Our forecast highlights the emergence of 400 Gbps and evolution of 5G transport infrastructures:

Demand for 400 Gbps capable routers will start to ramp in 2021 and become the growth engine for high capacity network expansion for the foreseeable future. Adoption will be mainly for core network use cases, but with the need for high capacity IP transport being pushed to the edge of networks, 400 Gbps will see broader adoption than 100 Gbps in its initial stages.

Coinciding with the emergence of 400 Gbps routing technologies are disaggregated router solutions in which the network operating system software is sold independently from the hardware, and the availability of 400ZR optical modules with a potential reach of 120 kilometers. These technologies bring new dynamics to the market that potentially alter the competitive landscape.

The global transition to 5G radio access networks (RAN) technologies will generate long-term demand for IP transport network upgrades. Higher capacity products will be an important aspect of the upgrade cycle, but service providers will require entirely new levels of functionality, scalability, and operational efficiencies to deliver the high-value 5G services they envision. What this means to that IP and software functionality will be distributed even more broadly across the network infrastructure.

 

About the Report The Dell’Oro Group Service Provider Router and SD-WAN Five Year Forecast Report offers complete, in-depth coverage of the Service Provider Core and Edge Router, Aggregation Switch, SD-WAN, and Enterprise High-end/Access Router markets for future current and historical time period. The report includes qualitative analysis and detailed statistics for manufacture revenue by regions, customer types, and use cases, average selling prices, and unit and port shipments. For more information or want to get a copy of the report, please contact dgsales@delloro.com.