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Backhaul Trends Point to Less GaAs Revenue

by Eric Higham | 4月 30, 2015

Well, it’s that time of year again! Those of you who regularly read this blog know how much I love April! The ice is off the lake (at least in the Northeast), so to speak and things start to heat up, literally and figuratively. As the weather warms, the compound semiconductor industry ramps up from what is typically a slow first quarter. It’s a time to start planning and nurturing those plants and ideas to ensure that they grow. There are several interesting topics gaining momentum, so I am aiming for multiple entries over the next few weeks, but let’s start with backhaul.

 I just finished an update on the backhaul market (Wireless Backhaul RF Component Demand: 2014-2019) and my research turned up some interesting trends. The first trend is not really too surprising; our need for any place, any time data consumption is influencing the evolution of wireless networks. Deployments of wireless networks generally start with densely populated urban areas, but for the networks to satisfy the “any place, any time” desire of consumers, they have expanded to cover residential areas outside urban centers, smaller towns and even sparsely populated rural areas. As the geographic footprint of the wireless networks has expanded, wireless backhaul seemed like the best way to aggregate and transport data generated at any point in the wireless network. The rationale was that as networks expanded, it was increasingly unlikely that fiber would be present at wireless cell sites and it would be prohibitively expensive to run fiber to these sites.

Prospects became even brighter for wireless, with the concept of “densification”. In this architecture, operators would add lower power, smaller footprint cells to augment data capacity. Densely populated areas were going to drive this “small cell” architecture to respond to data capacity needs. Small cell proponents argue that if fiber is not present at the right spot in these densely populated areas, it is too expensive and disruptive to trench fiber. Even if the “distance to fiber” is short, this also plays into the strengths of high frequency wireless backhaul bands. These reasons, coupled with very low wireless penetration in North America and China painted a very bright picture for wireless backhaul growth.

As my research showed, this does not appear to be the case. The number of wireless backhaul radios will increase, but only slowly out to 2019. The chart from Ericsson supports this conclusion by showing the microwave portion of the backhaul market decreasing in market share. Wireless will still represent the majority of backhaul in 2019, but what has happened to the rosy picture that the wireless industry is painting?

Backhaul Trends Point to Less GaAs Revenue

There appear to be two main contributors to the less than spectacular growth of wireless backhaul. The first reason is a much slower than expected deployment of the small cell network architecture. Lower power cells are deploying, but the quantities are substantially lower than anticipated. A big reason for this is the ubiquity of Wi-Fi coverage. Reports show that the vast majority of wireless data is offloaded to a Wi-Fi access point and then to a wired backhaul network. This reflects the nomadic nature of wireless communications. We are more likely to consume data at fixed points like home, work and coffee shops, connected to Wi-Fi rather than the cellular network when we are mobile.

 

The other big contributor is that wireless backhaul is a victim of the success of wireless data. This sounds a bit counterintuitive, but wireless data consumption is growing so quickly that it is creating challenges for radio manufacturers. I often oversimplify the issue by saying that if you want to increase the data handling capacity, you increase the spectral efficiency in a given bandwidth or you increase the bandwidth. Radio manufacturers are doing both, but more spectral efficiency implies more sophisticated modulation schemes or a denser network and more bandwidth implies higher transmit frequencies. Both of these solutions add cost to the wireless radio links.

 

From my standpoint, the most interesting development in backhaul is the C-RAN (cloud radio access network) and “fronthaul” architecture. In this architecture, the processing and baseband resources are centrally pooled and the remaining RF circuitry, typically called a remote radio head is moved toward the antenna. These units are much smaller than conventional macrocell base stations, so siting costs are concerns drop significantly. Central processing allows operators to time shift resources to follow capacity needs. This has been the Holy Grail of the mobile industry for some time. If operators can (virtually) move this capacity, they can save on both capital and operating expenditures by not having to support underutilized cells, scaled for peak capacity.

 

This has the potential to be a disruptive architecture for fiber. The hurdle for operators has been the cost of extending fiber to a specific location. In many cases, the cost does not support the business model. Fronthaul expands the calculation beyond merely the cost of trenching fiber to a total cost of ownership discussion for the network, including the increased capabilities that fronthaul offers. This looks to be a far more compelling argument.

 

So, check the report for more details on fronthaul, the growing importance of high frequency bands for wireless backhaul, the forecast for RF content and revenue in wireless backhaul radios, increasing GaN content and many other topics.

 

-Eric

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