Mixed Signals for Europe’s Communications Infrastructure Suppliers

Article By : John Walko

Ericsson and Nokia remain second and third amongst the top seven suppliers.

Europe’s communications infrastructure champions Ericsson and Nokia have experienced mixed fortunes in the global market over the past quarter, according to market research group Dell’Oro.

The researchers suggest the market is relatively buoyant and resilient and has made a strong start to the year, billing revenues up 15% on the same period last year. The positive activity has led Dell’Oro to raise upwards its expectations for 2021, and the group now projects the total market will increase by between 5% to 10% for the year, generating almost $100 billion in revenues.

Previously, the researchers had suggested growth revenue growth rates of between 3% to 5%.

The Scandinavian duo remain second and third amongst the top seven suppliers, still well behind Chinese behemoth Huawei which, despite its recent geopolitical setbacks – mostly due to the United States querying its national security concerns and many countries subsequently banning it from their 5G rollouts – still has a 36% share of the market, down 5% on the corresponding period last time.

According to Stefan Pongratz, VP at the Dell’Oro group, the gap between Nokia and Ericsson combined and its Chinese competitor, which was around 5% back in 2015, has now been eliminated in the latest quarter. While the two European groups have been competing intensely over the years, with Nokia normally having a small advantage as regards revenues, Ericsson has now caught up, and both have an estimated 16% share of the global market.

However, Ericsson’s recent progress faces some tricky bumps along the road, following the Swedish government’s decision to exclude Huawei gear in some, predominantly mobile communications, segments. China has already threatened to retaliate and has instructed the country’s mobile comms operators to desist from using the Swedish group’s equipment in many parts of the network.

Ericsson has enjoyed surprisingly good business amongst Chinese carriers in the past, mostly because of the quality of its products in the mobile sector. Reports suggest it picked up about 11% to 12% of contracts for RAN business in China’s first 5G tender last year and is believed to have shipped 700,000 base stations.

Meanwhile, Nokia has been losing 5G business in both the US and China since some of its products are deemed to be less competitive. In part, the problem has been due to some specific components that it had developed in house, which turned out to be more expensive than similar devices available on the open market. It has now fixed many of these issues, but it will take time for that to feed into more contracts.

Huawei’s setbacks in Europe, the United States and Australasia were partly offset by increasing demand in the home market and increased activity in most African countries.

The top seven are completed by ZTE, Cisco, Samsung and Ciena (see chart), and they represent some 80% of the total market. Interestingly, Samsung leapfrogged Ciena during the quarter, relegating the U.S. group to seventh (see chart).

Dell'Oro

Dell’Oro’s forecasts and analysis cover a wide range of infrastructure gear, including mobile core and radio access networks, broadband access, microwave and optical transport, SP router and switch sectors.

The analysts highlight that following three consecutive years of growth between 2018 and 2020, preliminary indications are the positive momentum that characterised the overall telco market extended into the first quarter, “underpinned by double-digit growth on a year-on-year basis in both wireless and wireline technologies, including broadband access, microwave transport, mobile core network, RAN, and SP router and switch.”

The strong performance in the quarter is said to have “surprised on the upside by about 2%, underpinned by stronger than expected activity in multiple technology domains including broadband access, microwave transport, RAN and SP routers and switch.”

North America and Asia Pacific enjoyed the strongest first quarter gains, both in excess of 15% year-on-year, most notably in the broadband access and RAN segments.

One clear driver has been the shift from 4G to 5G, which has “continued to accelerate at a torrid pace”, that is also forcing operators globally to upgrade their core and transport networks.

Pongratz also stresses that, at a high level, the comms suppliers did not report any material impact from the on-going supply chain shortages in the first quarter, referencing mainly the global problems in the semiconductor segment. This appears to contradict other reports suggesting a worrying shortage in key components in many sectors.

Pongratz added the caveat that multiple vendors indicated “that the visibility going into the second half is more limited.”

Leave a comment