Huawei and ZTE increased their revenue shares while Nokia and Cisco’s revenue shares declined for the full year 2019 telecom equipment market.

We just wrapped up the 2019 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 & CE Switch – advanced 2% during 2019, recording a second consecutive year of growth.

Full-year 2019 revenue shares relative to 2018 revenue shares for the top five suppliers – the latter indicated here in parenthesis – show that Huawei, Nokia, Ericsson, ZTE, and Cisco comprised 28% (28%), 16% (17%), 14% (14%), 10% (8%), 7% (8%), respectively.

Additional key takeaways from the 4Q 2019 reporting period include:

• Following three years of declining revenues between 2014 and 2017, the overall telecom equipment market advanced for a second consecutive year in 2019, validating the message we have communicated for some time now, namely that there are reasons to be excited about the telecom market.
• Within the technology segments, mid-single digit growth in Optical Transport and RAN was more than enough to offset weaker demand for Microwave Transport and Broadband Access equipment. The two largest equipment markets in the year were Mobile RAN and Optical Transport, together accounting for about 55% of the overall telecom equipment market.
• The RAN market surprised on the upside and performed better than expected in 2019, propelled by 5G RAN growth that continued to accelerate throughout the year at a torrid pace.
• The worldwide Optical Transport market continued to expand for a fifth consecutive year, recording the highest growth rate in nearly a decade. Helping to drive this acceleration is robust growth for WDM.
• Stable demand for PON equipment was not enough to offset declining investments in Cable and DSL, pushing the overall Broadband Access Market to a fourth consecutive year of declining revenues.
• The efforts by the U.S. government to curb Huawei’s rise has so far had mixed results – we estimate Huawei’s overall telecom equipment share continued to improve in 2019, but the pace of the 2019 share growth was weaker than its average 2014-2019 share growth.
• ZTE’s revenue share improved by about 2 percentage points in 2019, reflecting a robust recovery since the U.S. ban during 1H18.

Dell’Oro Group telecommunication infrastructure research programs consist of the following: Broadband Access, Microwave Transmission & Mobile Backhaul, Mobile Core Networks, Mobile Radio Access Network (RAN), Optical Transport, Service Provider (SP) Router & Carrier Ethernet Switch, and Telecom Capex.

We just published the 4Q19 update to the Microwave Transmission & Mobile Backhaul quarter report. Here are a few key findings for the quarter.

• Microwave Transmission market declined in 2019 following a slight rebound the prior year. The decline in 2019 was due to a massive slowdown in India. We estimate sales to Indian operators declined over 50 percent in the year.
• Huawei continued to hold the largest share of the Microwave Transmission market, garnering 29 percent share in 4Q19.
• Vendor share was more fluid than usual in the quarter. Typically the top three vendors in this market consists of Ericsson, Huawei, and NEC. In 4Q19, Nokia overtook Ericsson for the first time and captured the second highest share.
• E/V Band shipments outperformed in the quarter, helping to bring full year growth rates back up above 20 percent.
• Among the microwave technology segments, we believe E/V Band systems have the greatest growth potential driven by its ultra-high capacity (10 Gbps), small footprint, and low spectrum license fees in certain countries. In addition to these advantages, demand for E-band systems in particular is projected to grow because of the availability of multi-band solutions that combine the benefits of both standard microwave frequencies with that of E-band.

About the Report

The Dell’Oro Group Microwave Transmission & Mobile Backhaul Quarterly 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 and Hybrid Microwave as well as full indoor and full outdoor unit configurations.  To purchase this report, please contact us at dgsales@delloro.com

The latest Dell’Oro Group CBRS RAN 5-year forecast report suggests delays have not changed the underlying demand for CBRS. The overall CBRS market – LTE plus 5G NR – is expected to grow at a rapid pace between 2019 and 2024 with cumulative RAN investments projected to surpass $1.5 Billion.

Even if the regulatory process has taken significantly longer than expected (> 4 years since initial NPRM), the high level vision has not changed. We continue to believe that there is an opportunity to improve spectrum utilization while at the same time stimulating innovation for both public and private networks. The CBRS band with its unique spectrum sharing characteristics include many of the right ingredients to be a game changer over the long term, making us extremely optimistic about the opportunities within the CBRS band. At the same time, we also believe it is important to be realistic about the potential upside with new opportunities—we still envision that CBRS deployments targeting new business models and use case will need some time to cross the chasm.

Other highlights from the CBRS 5-Year Forecast Report:

• CBRS capex is not projected to have a significant impact on the WLAN capex.
• CBRS investments are projected to account for a mid-single digit share of the overall North America RAN market.
• Activity is anticipated to accelerate rapidly during the forecast period. 5G NR is expected to drive the lion share of the service provider CBRS capex in the outer part of the forecast period while LTE will likely dominate the technology mix for FWA, IoT, and Enterprise deployments through the forecast period

About the Report

Dell’Oro Group’s Advanced Research: Citizen Broadband Radio Service (CBRS) Report offers an overview of the CBRS LTE and 5G NR potential with a 5-year forecast for the CBRS RAN market by technology, location, and buyer along with an analysis about the vendor landscape. To purchase this report, please contact us by email at dgsales@delloro.com.

Every generation of mobile radio technology creates renewed demand for mobile backhaul, and 5G is expected to do the same. So, it is not surprising that the major 2020 trends in mobile backhaul all relate to 5G, what the latest mobile technology means for backhaul transport equipment, and importantly, what we will need “more” of.

Trend #1: More Fiber Backhaul. Undoubtedly, the mobile network will require more network capacity with the roll out of 5G. One of the many benefits of 5G is the option to use a larger amount of spectrum and bump up the capacity for users. This is the reason so many people start a conversation about 5G and immediately shift to talking about what new applications they can run if given more throughput and lower latency on their devices.

Trend #2: More Wireless Backhaul. As in past mobile network upgrades (3G and 4G), operators balanced the use of fiber backhaul with wireless backhaul because installing fiber everywhere was never conceivable. In continuation with this trend, we believe that the mantra of “fiber first” will continue, driving the growing use of fiber backhaul, but eventually cell sites will need to be upgraded where fiber will either take too long to deploy, cost too much, or is infeasible. Therefore with 5G, wireless backhaul systems, such as point-to-point microwave, will play an equally important role for operators to deliver on their targeted network coverage and capacity as fiber systems.

Trend #3: More Carriers. Microwave systems continue to evolve to meet each new generational challenge. We believe one technology that operators will increasingly use in the future, and for 5G backhaul in particular, is combining multiple carriers in one microwave backhaul link. The two options are multicarrier—combining carriers in the same frequency band—and multiband—combining disparate frequency bands such as E-band and 18 GHz. The advantage of both options is higher link capacity with little change in tower footprint (keeping tower lease costs from going up). The additional advantage of multiband is the availability of much higher throughput (over 10 Gbps) at an economical price-per-bit compared to standard microwave frequency links.

Trend #4: More Ethernet. The shift to Ethernet began with 4G and will conclude with 5G. Therefore, the need for TDM-based systems and hybrid systems will continue to decline in favor of Ethernet-based systems (carrier Ethernet switch, routers, packet microwave, etc.) this year and into the future.

Trend #5: More Fronthaul Transport. 5G will likely bring about greater instances where the mobile baseband unit is centrally housed further away from the mobile radio unit (and tower) to obtain greater efficiency. To achieve these longer spans, operators will increasingly use fronthaul transport systems such as DWDM. While this architecture of pooling resources has always been available to operators, we believe the entrance of eCPRI will increase the adoption of centralizing baseband units since it reduces fronthaul capacity requirements.

The Optical Transport market has continuously evolved, giving consumers around the world one of the most precious assets—fast, affordable bandwidth. Whether it is 5G, home broadband, cloud services, or videos of cats, the one technology that enables the existence of these services is optical. So, it is no wonder that the one equipment that service providers (telecom, cable, cloud, etc.) need to continuously invest in and purchase is Optical Transport gear. Luckily for these buyers, market demand has grown at a rate fast enough for optical system and component manufacturers to continuously invest their R&D money towards developing better optical technology that transports more bits at an even better cost. What if this changes in the future?

Consider this: every generation of optical technology costs more to develop. Meanwhile, Shannon’s limit is around the corner, and fewer optical companies generate enough profit to maintain this pace of innovation. I won’t address this long-term concern here, but considering this, I have listed a few trends to watch in 2020.

• Selective vertical integration will continue. System houses such as Ciena, Huawei, and Infinera will continue to invest in developing key component technologies to ensure they capture a significant share of the optical systems market and reduce the bill-of-materials (BOM) on highly advanced coherent line cards. When Cisco closes its acquisition of Acacia, the number of Optical Transport vendors that in-source high-end components (coherent DSP, TIA, drivers, and modulators) will increase. In 3Q19, these four vendors had approximately 60 percent share of the WDM market. If we also consider vendors that have in-house coherent DSPs, this share jumps to 70 percent and could potentially increase if additional vendors decide to “make” rather than “buy.”
• Coherent 800 Gbps-capable line cards will enter the market. We know of three vendors—Ciena, Huawei, and Infinera—that will launch 800 Gbps-capable line cards by the end of 2020. Ciena will be first to market, closely followed by Infinera, and then Huawei. These new line cards will use the latest optical components (90+ Gbaud, photonic integration) and most powerful coherent DSPs with probabilistic constellation shaping that will bring the wavelength performance to near Shannon’s limit.
• A faster shift away from 100 Gbps wavelengths to 200 Gbps and 400 Gbps wavelengths. The use of 200 Gbps wavelengths has already been rising to maintain a steady price-per-bit decline. With the availability of 800 Gbps-capable line cards, the market will increasingly deploy 400 Gbps wavelengths this year. That is, with 800 Gbps-capability, a line card can be employed at 400 Gbps across longer span lengths, making long haul 400 Gbps at an economical price point a reality.
• Coherent 400 Gbps in a pluggable form factor is here. There is no denying that coherent optics will shrink into a pluggable form factor. Both Inphi and NeoPhotonics have announced tests and trials of 400G ZR in QSFP-DD and OSFP form factors as well as a 400G ZR+ version in a CFP2-DCO. It is still a little early in the year, but we believe systems using these pluggable 400 Gbps modules will enter the market by the end of 2020. However, significant sales volume may not occur until 1H21.
• Adoption of IPoDWDM will increase. IPoDWDM isn’t a new concept. It has been available for over a decade, and Cisco has done quite well (relatively speaking) selling IPoDWDM systems. However, this architectural approach never really obtained wide-spread adoption. We think one of the many reasons behind this is that the target market was on core routers stationed in the long-haul network. A better opportunity for IPoDWDM, as evidenced by Inphi’s sales of ColorZ to Microsoft, lies in selling IPoDWDM in metro access applications such as data center interconnect. Therefore, with 400G ZR in a QSFP-DD form factor, we should see a wider adoption of IPoDWDM in metro applications such as data center interconnect and distributed access architecture (DAA).
• System vendors will move into the components market. This may be a more “why not?” situation. If a system vendor develops a component, why not make it available for others to buy, since selling any components will help offset the company’s R&D costs? Also, at the end of the day, it is a good hedge against IPoDWDM. If you don’t win the system business, why not try to win the optical components portion?

Each of these listed trends are by no means revolutionary. In fact, each has been in the making for many years to sustain one goal—fast, affordable bandwidth.