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Entering A New Era? – A Review for RAN Infrastructure Market in H1 2021

by Guang Yang | Aug 23, 2021

It is a turbulent time for the global radio access network equipment market. 5G deployment is extended, new architectures and new players are emerging, and a leading vendor is facing the pressure beyond the ordinary market competition. How will the market evolve, and what will be the impacts on the industry chain? A review of the market in the first half of this year may be able to give some clues.

China’s scale far ahead of other countries, Huawei is the biggest winner.

Since the 5G licenses issued in mid-2019, Chinese operators have been rolled out 5G networks in a much faster pace than their counterparts in other countries. More than 960 thousand 5G base stations have been deployed in China by the end of June, accounting for around 70% of 5G base stations worldwide, according to China’s MIIT. As discussed in our recent report China's 5G Base Stations to Double in 6 Months?, Chinese operators have launched the new round of massive 5G deployments in 700 MHz and 2.1 GHz bands. China government also published an industry policy plan to promote the 5G development in 2021 – 2023 period. It is expected that the number of 5G base stations in China will be more than 1.4 million by the end of this year, and the number will be over 2.5 million by 2023, if the objective of the government’s policy plan is achieved.

The aggressive network rollout makes China the largest 5G market worldwide, far ahead of other countries. The huge market size significantly benefits Chinese domestic vendors. Huawei is unquestionably the dominant supplier in the Chinese market. The fast-expanding home market is a strong growth engine for Huawei’s carrier business (see our report Why is Huawei still so Confident? - Behind Huawei's 2021 H1 Business Results).

In a recent internal Q&A session, Guo Ping, Huawei’s rotating chairman, signalled Huawei’s ambition to expand its role in the semiconductor supply chain through “founding and helping supply chain partners solve supply continuity and competitiveness issues.” The huge home market and its dominant market position will lay out a foundation for Huawei’s ambition and support its sustainable development.

New players emerging in the market, while performance still a key factor influencing operator’s choice

Chinese vendors’ win leads to the shrink of western vendors’ share in China market. In the two recent tenders with totally over 700 thousand base stations (480 thousand 700 MHz 5G base stations and 240 thousand 2.1 GHz 5G base stations), Ericsson and Nokia just got 2-3% share respectively. This will extend the scale gap between the western vendors and their Chinese competitors and will eventually impact on the competitiveness of these western incumbents in other regional markets.

On the other hand, in their home region, Ericsson and Nokia are benefiting from the restriction on Huawei. However, they also face challenges from the emerging players. In the countries where Huawei is banned or facing geopolitical pressure, telecom operators often prefer to introduce new architectures and new players, rather than relying on the incumbent vendors, to avoid the duopoly situation. Samsung’s win in Vodafone UK is such a case. The increasing demands for private 5G (see our recent report Who Buys Local 5G Spectrum and How Are Private Wireless Networks Deployed?) also create opportunities for the emerging vendors.

But through analysing the market situation and the requirements, we can see that network performance is still at the core of operator’s business strategy (see our report A Growing 5G Market Requires High Performance Network Solutions). The large incumbent vendors continue to have advantages in RAN equipment specifications and performance that already meet the criteria of leading operators. On the other side, the high standards for network performance and equipment specifications have set a high bar for the emerging vendors to enter the telecom operator market. The emerging players need to evaluate which market segment they should focus on in the short to middle term (see our report Operator Choices Suggest some Early Winners in the First Wave of Open RAN Deployments in Europe).

R&D Investment will decide the market position in a long run.

GSMA resumed Mobile World Congress Barcelona and announced the 2021 GLOMO Awards this June. Huawei was one of the biggest winners, with three awards including the heavyweight Best Mobile Network Infrastructure award. Huawei is the company that has won the Best Mobile Network Infrastructure Award the most times in the past ten years (see the exhibit right).GLOMO Best Mobile Network Infra Award

Huawei’s harvest in the GLOMO Awards is just aligned with the increase of its R&D investment. The EU Industrial R&D Investment Scoreboard shows that Huawei became one of the top 10 R&D Investing Companies worldwide for the first time in the fiscal year 2015/16 and the top R&D investing company in the Technology Hardware & Equipment Sector worldwide in the fiscal year 2017/18.

In fact, the top 3 RAN equipment vendors, Huawei, Ericsson, and Nokia, are all listed in the Top 10 R&D investing companies in the Technology Hardware & Equipment Sector, according to the 2020 EU Industrial R&D Investment Scoreboard. The heavy R&D investment not only enables these incumbent vendors to continuously improve their products and solutions, but also to significantly extend their IPR portfolios.of its R&D investment. The EU Industrial R&D Investment Scoreboard shows that Huawei became one of the top 10 R&D Investing Companies worldwide for the first time in the fiscal year 2015/16 and the top R&D investing company in the Technology Hardware & Equipment Sector worldwide in the fiscal year 2017/18.

It can be expected that the incumbent vendors will leverage their extensive IPR portfolios to defend their positions in the RAN market. They can also leverage the IPR portfolios to expand the business footprint in global ICT markets wherever 5G and digital transformation play a crucial role in diverse vertical industries or enterprise networks. On the other hand, we also expect the emerging players in the RAN equipment market could further strengthen their R&D investment to boost the market competition with more disruptive innovations.

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