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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We recently published an update to our Service Provider (SP) Router and Carrier Ethernet Switch (CES) five-year market forecast report. Compared to our prior forecast in January, we made some significant adjustments to incorporate the impact of the COVID-19 pandemic. On the other hand, our view of emerging technology trends remains largely unchanged, and that demand will remain healthy over the coming years. Our forecast isn’t as rosy as our January outlook, but we still expect The SP Router and CES market to grow annually from 2021 and to top $15 billion by 2024.

The COVID-19 pandemic led to a major reset of our forecast assumptions and market growth profile for the next five years. For the short term through 2020, market growth will be suppressed due to supply and human resource constraints, as well as weakened macroeconomic conditions. Over the longer term, from 2021 through 2024, we expect the technology and use case drivers of our prior forecasts to remain largely intact and drive annual growth.

The good news is that the importance of technologies such as 400 Gbps, 5G, and Cloud networking remains unchanged or perhaps even more so in the face of tighter capital spending and infrastructure investments. These prioritized spending will lead to a faster decline in spending for less critical infrastructure and legacy technologies.

On the 400 Gbps technology front, the emergence of new products will be a big growth driver over the next five years. Network operators see 400G as a logical step to increasing network capacity at lower costs for hardware and operations. The ecosystem of 400G technologies, from silicon to optics is ramping and throughout 2020, a broad range of routers supporting 400G will become commercially available. Starting in 2021, large-scale deployments will contribute meaningful market. By 2024, we expect 400G to generate almost $3 billion in manufacturers’ revenue and to be widely deployed in all of the largest core networks in the world.

One phenomenon of the pandemic has been the acceleration of 5G radio deployments in 2020 as service providers see the opportunity to build differentiated networks and associated services. Along with the 5G radio deployments, many network operators are upgrading IP transport capacity in backhaul networks. Over the next five years, we expect to see multiple waves of backhaul network investments as operators deploy 5G at varying times and rates around the world. Initially, networks will be upgraded to support the faster data rates of 5G services. Over time, we anticipate a larger focus on implementing extensive and very granular network management, control, and automation capabilities that enable the vast array of services that service providers envision.

We hear so much about the adoption of Cloud services, but what is often overlooked is the massive IP networks used to interconnect the thousands of Cloud data centers and points of presence, to private networks, and the public Internet. Sales of Service Provider Core and Edge routers to Cloud operators are expected to grow at a higher rate compared to sales to Telecommunication Service Providers. The largest Cloud operators will be the early adopters of 400G as they upgrade from 100G in their backbone networks to accommodate the traffic growth to and from, and across their data centers.

In summary, we maintain a positive growth outlook for the SP Router and CES market over the next five years. Demand is coming from the tremendous growth of new and innovative services from Telecom and Cloud SPs that in turn drive the need to expand IP network capacity and functionality. The potential supply of many new products and technologies that meet the new network requirements is emerging from the entire technology ecosystem. We look forward to watching the industry’s progress!

If you need to access the full report to obtain revenue, units, pricing, relevant segmentation including regions and vertical markets, etc., please contact us at dgsales@delloro.com

About the Report:

The Dell’Oro Group Router & Carrier Ethernet Switch Five Year Forecast Report offers complete, in-depth coverage of the Service Provider Core and Edge Router, Carrier Ethernet Switch, and Enterprise Router markets for future current and historical time periods. 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.

 

 

Industry Standards Organizations and Service Provider Alliances Work Together to Promote MEC

We just published the July 2020 Multi-Access Edge Computing (MEC) market forecast report. The industry collaboration and the momentum being achieved, our July 2020 five-year MEC forecast (2019 to 2024) has doubled from our January 2020 forecast. The market is still expected to start slow but greatly accelerates in the second half of the forecast period. We expect the China market will be leading in the scale of MEC deployments and will represent the largest regional market. Here are some key takeaways from the report:

• Dell’Oro Group’s MEC report covers what is known as the Infrastructure Edge, on the upstream side of an access network. It does not cover the Device Edge, on the user side of the access network. Content Delivery Networks (CDNs) and virtual Radio Access Networks (vRAN) are also not included.
• 5G Service Providers are expected to be the primary connectivity providers for MEC Systems per the market defined. Cloud Service Providers will partner with 5G Service Providers to extend their services to 5G systems.
• Since the publication of the January 2020 MEC report, 3GPP and European Telecommunication Standards Institute (ETSI) have continued to update the MEC specifications.
  • ETSI published a new white paper in July 2020, “Harmonizing standards for edge computing – A synergized architecture leveraging ETSI ISG MEC and 3GPP specifications.” This white paper has outlined the collaboration between ETSI and 3GPP to prevent any fragmentation in the MEC ecosystem.
  • 3GPP has already drafted a specification incorporating the harmonization.
• GSMA has been rallying the Service Providers into working together under the umbrella of the Operator Platform for Edge Cloud Computing, a concept outlined in a January 2020 white paper.
  • In Phase 1, the Operator Platform Concept is focusing on federated multiple operator’s edge computing infrastructure to give application providers access to a global edge cloud to run innovative, distributed, and low latency services through a set of common application programmable interfaces (APIs).
  • Service Providers have created alliances to work on these issues such as the Bridge Alliance Global MEC Task Force and the 5G Future Forum.
  • In July 2020, fruits of these efforts were publicized between Deutsche Telekom and Telefónica who implemented a cross-border trial with the MobiledgeX’s aggregated platform that validates federated Telco Edge Cloud for differentiated XR gaming.
• 5G Automotive Association (5GAA) has partnered with ETSI now on two Plugtests. The 5GAA supports the idea that 5G will be the ultimate platform to enable Cooperative Intelligent Transportation Systems (C-ITS) and the provision of V2X (vehicle-to-everything) communications.

Click here to learn more about Dell’Oro Multi-Access Edge Computing Advanced Research Report. If you want to get a sample of the report, please contact us.

About the Report

Dell’Oro Group’s Advanced Research Report on Multi-Access Edge Computing offers an overview of the MEC market, including a five-year forecast. The report’s sections include: Definition and Scope, Market Drivers, Use Cases, System Architecture, Vendor Ecosystem, the U.S. MEC System Deployment Model, and MEC Revenue and Shipment Forecast for Servers and the Packet Core User Plane Function. The market is segmented by Public MEC and Private MEC, and offers a worldwide view of the total available market in units. To purchase this report, please contact us at dgsales@delloro.com.

 

Dell’Oro Group published an update to its research on Network Equipment (NE) Services. The following are some of the key takeaways from the report.

Network Equipment Services Market Returning to Growth

Following five consecutive years of market contraction, the NE Services market began to reverse direction, growing slightly in 2019 due to positive developments with Network Rollout Services and Consulting Services offsetting reduced demand for Managed Services. We expect the improved market sentiment in 2019 will extend through the forecast period, resulting in the market registering $46 billion in 2024.

Near Term Challenges with Managed Services

Managed Services is expected to weigh on the market in the near term as vendors continue to exit contracts that are unprofitable and non-strategic. However, we are optimistic about the role of managed services in the future as networks continue to increase in complexity and vendors deliver a greater amount of automation to proactively maintain networks, reducing the number of costly alarms.

Network Equipment Services is Evolving

While “plan, build, operate, and maintain/transfer” remains a critical aspect of the services market, it is not expected to be the dominating driver for services in the future. The reason for this change in drivers is that the next network generation is not just about installing the newest hardware, expanding network coverage, or reducing the number of network layers. While these will still be part of the next network solution, we believe that network complexity will dramatically increase in the future as service providers strive to incorporate SDN/NFV, IoT, 5G real time services, along with exploring new architectures such as Open RAN. As a result, we believe Service offerings in the future will increase in sophistication often incorporating a higher amount of software and consulting.

Vendor Landscape is Stabilizing

Following five years of dynamic share shifts, the top three vendors—Huawei, Ericsson, and Nokia—have held their market share for the past three years. Together these three vendors accounted for about 75 percent of the NE Services market in 2019.

Click here to learn more about the report coverage or contact us for a sample report, please contact us at dgsales@delloro.com.

 

About the Network Equipment Service Advanced Research Report:

Dell’Oro Group’s Network Equipment Services report covers the service offerings by select network equipment manufacturers (vendors) that supply service providers. The network equipment we are referring to includes such equipment as broadband access, optical transport, routers, and mobile radio infrastructure. Network Equipment Services are reported in three segments: Rollout Service, Managed Service, and Consulting Service.