We just wrapped up the 4Q20 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 7% year-over-year (Y/Y) for the full year 2020, growing at the fastest pace since 2011.

The analysis contained in these reports suggests revenue rankings remained stable between 2019 and 2020, with Huawei, Nokia, Ericsson, ZTE, Cisco, Ciena, and Samsung ranked as the top seven suppliers, accounting for 80% to 85% of the total market. At the same time, revenue shares continued to be impacted by the state of the 5G rollouts in highly concentrated markets. While both Ericsson and Nokia improved their RAN positions outside of China, initial estimates suggest Huawei’s global telecom equipment market share, including China, improved by two to three percentage points for the full year 2020.

 

 

We estimate the following revenue shares for the top seven suppliers:

Source: Dell’Oro Group

Top 7 Suppliers	Year 2019	Year 2020
Huawei	28%	31%
Nokia	16%	15%
Ericsson	14%	15%
ZTE	9%	10%
Cisco	7%	6%
Ciena	3%	3%
Samsung	3%	2%

 

Additional key takeaways from the 4Q20 reporting period include:

• Preliminary estimates suggest that the positive momentum that has characterized the overall telecom market since 1Q20 extended into the fourth quarter, underpinned by strong growth in multiple wireless segments, including RAN and Mobile Core Networks, and modest growth in Broadband Access and CES.
• Helping to drive this output acceleration for the full year 2020 is faster growth in Mobile Core Networks and RAN, both of which increased above expectations.
• Covid-19 related supply chain disruptions that impacted some of the telco segments in the early part of the year had for the most part been alleviated towards the end of the year.
• Not surprisingly, network traffic surges resulting from shifting usage patterns impacted the telecom equipment market differently, resulting in strong demand for capacity upgrades with some technologies/regions while the pandemic did not lead to significant incremental capacity in other cases.
• With investments in China outpacing the overall market, we estimate Huawei and ZTE collectively gained around 3 to 4 percentage points of revenue share between 2019 and 2020, together comprising more than 40% of the global telecom equipment market.
• Even with the higher baseline, the Dell’Oro analyst team remains optimistic about 2021 and projects the overall telecom equipment market to advance 3% to 5%.

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.

 

The Massive MIMO RAN market – which includes baseband and radio revenues for large-scale antenna systems featuring > 8T8R sub 6 GHz LTE and NR radio configurations – ended the year on a high note, with full-year Massive MIMO RAN revenues more than doubling in 2020 propelling global transceiver shipments to approach the 0.1 B to 0.2 B range.

Not surprisingly, Massive MIMO-based technologies are power the vast majority of the 100+ commercial 5G networks. And more than 75% of the 0.2 B+ 5G subscriptions by year-end 2020 utilized the upper mid-band.

 

 

Helping to explain this output acceleration is the exceptionally robust 5G Massive MIMO growth in the Asia Pacific (APAC) regions, driven by large-scale deployments in China, elevated investments in Korea, and improving trends in Japan. And even though narrow-band NR has been the main focus for the leading US operators, T-Mobile’s wide-band 5G NR network covered roughly a third of the population by the end of 2020.

Even with the elevated baseline, we believe market conditions remain favorable. Global Massive MIMO growth is expected to tick up at a double-digit pace in 2021, underpinned by continued investments in the leading 5G markets and improving Massive MIMO coverage with the early majority segment – the GSA has identified 220 operators in 63 countries/territories with the right spectrum assets to deploy LTE or NR based Massive MIMO systems.

And equally important, the vendors continue to innovate and come up with incremental advances, improving the form factor, weight, performance, cost, and price. Just this past week, Samsung announced enhancements that will improve the Massive MIMO throughput by up to 30%. And Ericsson’s latest AIR 6419 64T64R radio weighs just 20 kg (200 MHz BW, 320 W). It was just two years ago at MWC 2019 in Barcelona when the same product configurations were in the ~40 kg range. Huawei also announced a new Massive MIMO radio weighing only 19 kg, down from 25 kg just last year, though it is not entirely clear from the announcement if we are comparing apples-to-apples with the Ericsson solution. Regardless, the suppliers clearly understand the role that Massive MIMO is already playing and will continue to play to optimize the overall TCO per capacity.

In short, 2020 was a phenomenal year for Massive MIMO, and we remain excited about the short-term and near-term prospects and will continue to monitor the market and vendor dynamics. For more information about our Massive MIMO coverage, please see the quarterly RAN and 5-Year Forecast RAN reports.

The Service Provider Router market—which includes Core, Edge, and Aggregation segments—held up reasonably well in 2020 despite the macroeconomic turmoil caused by the COVID-19 pandemic. Large-scale network operators, whether they be telecom, cable MSO, or cloud service providers, pulled back on some infrastructure investments, but on the whole, continued to add capacity to their networks to meet the expanding traffic loads. The worldwide SP Router market declined just one percent in 2020.

In our new 5-year forecast report, we are predicting that the worldwide SP Router market will resume growth in 2021 and continue to expand annually through 2025. To be clear, the SP Router market is a mature one, and our projected compounded annual growth rate (CAGR) in the low single-digits reflects the state of the market. Nonetheless, there are some clear opportunities for growth with emerging technologies and the evolution of network architectures. Our forecast highlights the emergence of 400 Gbps and evolution of 5G transport infrastructures:

Demand for 400 Gbps capable routers will start to ramp in 2021 and become the growth engine for high capacity network expansion for the foreseeable future. Adoption will be mainly for core network use cases, but with the need for high capacity IP transport being pushed to the edge of networks, 400 Gbps will see broader adoption than 100 Gbps in its initial stages.

Coinciding with the emergence of 400 Gbps routing technologies are disaggregated router solutions in which the network operating system software is sold independently from the hardware, and the availability of 400ZR optical modules with a potential reach of 120 kilometers. These technologies bring new dynamics to the market that potentially alter the competitive landscape.

The global transition to 5G radio access networks (RAN) technologies will generate long-term demand for IP transport network upgrades. Higher capacity products will be an important aspect of the upgrade cycle, but service providers will require entirely new levels of functionality, scalability, and operational efficiencies to deliver the high-value 5G services they envision. What this means to that IP and software functionality will be distributed even more broadly across the network infrastructure.

 

About the Report The Dell’Oro Group Service Provider Router and SD-WAN Five Year Forecast Report offers complete, in-depth coverage of the Service Provider Core and Edge Router, Aggregation Switch, SD-WAN, and Enterprise High-end/Access Router markets for future current and historical time period. 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. For more information or want to get a copy of the report, please contact dgsales@delloro.com.

Dell’Oro Group published a January 2021 Mobile Core Network market five-year forecast report

The Mobile Core Network (MCN) market’s cumulative manufacturing revenues are expected to approach $60 B from 2021 to 2025. The first 5G Standalone (5G SA) networks launched in 2020 resulting in manufacturing revenues for the 5G Core market for the first time, including network functions for packet core, policy and subscriber data management. Initial revenues were primarily in mainland China, and are expected to accelerate thru the forecast period as all regions around the world begin building their 5G SA networks. The 4G Core will still be the dominant core, but declining in the later years of the forecast as the growth of 5G Core offsets the decline. The IMS Core market will still continue to rise throughout the forecast period as the migration to 5G accelerates the need for VoLTE, and eventually VoNR.

 

APAC and EMEA Regions to account for over 70% of the revenues

Regionally, APAC (Asia-Pacific) and EMEA (Europe, Middle East, and Africa) regions are expected to account for over 70% of the revenues during the forecast period. The cumulative revenues for the EMEA region will exceed the APAC region for the first time in a forecast period, due to the number of growing subscribers in EMEA. APAC dominates in the first half of the forecast period which is eventually taken over by EMEA in the second half of the forecast period.

Network Function Virtualization (NFV) continues to grow

The revenue mix of NFV is expected to grow significantly approaching 100% in 2025, reflecting the move to 5G Core functions. NFV functions are moving from cloud-ready to cloud-native network functions (CNFs). At the same time, networks are migrating toward containers on VM servers, especially for 5G Core—and eventually to bare metal servers—eliminating the virtualization layer, thereby reducing both cost and complexity.

Multi-Access Edge Computing (MEC) will enable new consumer and enterprise applications

MEC will improve latency in the network for both consumer and enterprise applications. Consumers will be served by Public MEC deployments, while enterprise applications will be served by Public MEC and Private MEC (on-premises) deployments. For a more in-depth look at MEC, see the Dell’Oro Group MEC Advanced Research Report.

 

About the Report Dell’Oro Group’s Mobile Core Network 5-Year Forecast Report offers a complete overview of the market for Wireless Packet Core, IMS Core, policy, and subscriber management with historical data, where applicable, to the present. The report provides a comprehensive overview of market trends by network function implementation (Non-NFV and NFV), covering revenue, licenses, average selling price, and regional forecasts for various network functions. To get a copy of the report, please contact us dgsales@delloro.com.

Subscriber and Bandwidth Growth Will Remain Key Catalysts

Global spending on broadband access equipment and CPE is expected to drop only 2% in 2020, a significant improvement from our July 2020 forecast, which anticipated spending dropping by 7% in 2020. The combination of significant residential subscriber growth and increased capacity utilization rates noted by global broadband providers nearly offset the negative impacts of trade tussles, component shortages, and labor limitations.

In the first half of 2020, we heard from countless service providers that their projected capacity utilization rates for the entire year were reached by March or April. A second surge in consumption in the fall, driven by children returning back to school and attempts at re-opening economies forced many operators to add even more capacity. With much of the world still dealing with the impacts of the COVID-19 pandemic and with remote work and online education continuing well into 2021, we see no slowdown in broadband capacity utilization, forcing service providers to once again balance accommodating traffic growth with managing overall spending. Continuing RAN investments will force service providers to spend judiciously on their broadband networks. In certain cases, this will mean delaying longer-term strategic projects and focusing on addressing immediate capacity upgrades and onboarding a higher-than-average volume of new subscribers.

PON Equipment Spending Expected to Remain Solid

Our five-year CAGR for PON equipment has been increased to 3% from just under 1%. China, which has historically accounted for anywhere from 65-80% of total PON spending, has peaked in terms of total ONT units consumed on an annual basis. The Chinese FTTH market has matured, with broadband penetration in the country reportedly nearing 80%. Though subscriber growth is slowing, there is still a tremendous installed base of subscribers that will continue to require new ONTs.

Although China’s ONT volumes are coming down from the peak years of 2017 and 2018, additional growth is expected from the rest of the world—particularly North America and Western Europe. In North America, the FCC’s $20B RDOF (Rural Digital Opportunity Fund) program will help transition a significant number of rural areas to fiber over the next 5-7 years. In Western Europe, major operators including Orange, DT, BT OpenReach, and Proximus are all expanding their fiber rollouts and even moving quickly to XGS-PON for symmetric 10 G services.

Finally in Asia, India, Indonesia, and Malaysia, along with a 10 G upgrade cycle in Japan and South Korea should also help sustain the market.

Cable Infrastructure Spending Set for Growth

The glut of DOCSIS channel capacity that helped push down cable equipment revenue in 2018 and 2019 was actually beneficial to operators in 2020 as they were able to address significant increases in both upstream and downstream traffic during the pandemic with minimal increases in spending. In most cases, cable operators used the software tools available as part of DOCSIS 3.1 to ensure adequate bandwidth for all subscribers. In other cases, operators purchased additional DOCSIS licenses as part of accelerated node split programs to address systems with the greatest need.

Regardless, after two years of under-investing in infrastructure, the overall cable infrastructure market will see a steady increase in revenue throughout our forecast period, as mid- and high-split projects in North America and Western Europe, designed to increase upstream capacity, are accelerated. Investments in outside plant equipment, particularly new amplifiers and taps, will also continue as operators begin the multi-year process of preparing their networks for DOCSIS 4.0 and its ability to enable extended spectrum DOCSIS (ESD), low-latency DOCSIS, and full-duplex DOCSIS (FDD).

 

About the Report The Dell’Oro Group Broadband Access  and Home Networking 5-Year Forecast Report provides a complete overview of the Broadband Access market with tables covering manufacturers’ revenue, average selling prices, and port/unit shipments for Cable, DSL, and PON equipment. Covered equipment includes Converged Cable Access Platforms (CCAP), Distributed Access Architectures (DAA), DSL Access Multiplexers (DSLAMs), PON Optical Line Terminals (OLTs), Customer Premises Equipment ([CPE] for Cable, DSL, and PON), along with SOHO WLAN Equipment, including Mesh Routers. For more information about the report, please contact dgsales@delloro.com.