Following four consecutive years of modest telecom equipment growth across the six telecom programs tracked at the Dell’Oro Group*, preliminary findings show that the aggregate telecom equipment market moderated somewhat from the 8% revenue increase in 2021 to 3% year-over-year (Y/Y) in 2022.
Looking back at the full year, the results were slightly lower than the 4% growth rate we projected a year ago going into 2022. In addition to more challenging comparisons in the advanced 5G markets and the supplier exits in Russia, the strengthening USD weighed on the broader telecom equipment market. Supply issues also impacted the market negatively during 1H22 but eased somewhat in the second half.
Regional developments were mixed, underpinned by strong growth in North America and CALA, which was enough to offset more challenging conditions in EMEA and the Asia Pacific. With China growing around 4%, we estimate global telecom equipment revenues excluding China increase around 3% in 2022.
From a technology perspective, there is a bit of capex shift now underway between wireless and wireline. Multiple indicators suggest Broadband Access revenues surged in 2022, however, this double-digit growth was offset by stable or low-single-digit growth across the other five segments (Microwave Transport, Mobile Core Network, Optical Transport, RAN, SP Router & Switch).
Vendor dynamics were relatively stable between 2021 and 2022, with the top 7 suppliers driving around 80% of the overall market. Despite on-going efforts by the US government to limit Huawei’s TAM and access to the latest silicon, our assessment is that Huawei still leads the global telecom equipment market, in part because Huawei remains the #1 supplier in five out of the six telecom segments we track. At the same time, Huawei has lost some ground outside of China. Still, Nokia, Ericsson, and Huawei were the top 3 suppliers outside of China in 2022, accounting for around 20%, 18%, and 18% of the market, respectively.
Following five consecutive years of growth, the Dell’Oro Group believes there is more room left in the tank. Collectively the analyst team is forecasting the overall telecom equipment market to increase 1% in 2023 and record a sixth consecutive year of growth. Risks are broadly balanced and the analysts will continue to monitor the 5G rollouts in India, capex cuts in the US, and 5G slowdown in China (preliminary data by MIIT suggest new 5G BTS volumes will drop by a third in 2023 relative to 2022), wireless and broadband investments in Europe, forex fluctuations, and inventory optimization.
*Telecommunications Infrastructure programs covered at Dell’Oro Group, include Broadband Access, Microwave & Optical Transport, Mobile Core Network (MCN), Radio Access Network (RAN), and SP Router & Switch.
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OFC 2023 was a great conference this year with the exhibit hall packed with people exchanging thoughts and ideas. One of the main technology themes at the show was around terabit-capable coherent wavelengths. Hence, my main takeaway from the conference was that we are now in the Terabit Era.
During the conference, practically every component and systems manufacturer showed off their plans for a 1.2 Tbps-capable coherent wavelength. The only exception was Ciena with an advanced 1.6 Tbps single carrier solution.
New High-Performance Coherent DSPs
The next generation of coherent DSPs was announced and displayed by several companies. Based on conversations at the show, the first significant quantity of shipments could begin as early as 2H 2023 with a ramp in production during 2024. The following is a list of announcements related to high-performance sixth-generation coherent DSPs.
Cisco/Acacia Jannu: 1.2 Tbps-capable DSP on a 5 nm node process operating at up to 136 Gbaud. General availability target is mid-2023.
NEL ExaSpeed GAIA: 1.2 Tbps-capable DSP on a 5 nm node process operating at up to 140 Gbaud. General availability target is mid-2023.
Nokia PSE 6s: 1.2 Tbps-capable DSP on a 5 nm node process operating at up to 130+ Gbaud. General availability target is end-2023.
Infinera ICE7: Customized 1.2 Tbps-capable DSP from a partner supplier on a 5 nm node process operating at up to 148 Gbaud. General availability target is mid-2024.
Ciena WaveLogic 6e: 1.6 Tbps-capable DSP on a 3 nm node process operating at up to 200 Gbaud. General availability target is mid-2024.
On a side note, Huawei was not at this conference. However, in separate meetings with the company, we understand they have plans to develop a 1.2 Tbps-capable DSP operating at up to 130+ Gbaud. The semiconductor process technology is unknown at this time, but it may be 7 nm if SMIC can produce it.
Among the vendors, Ciena is the only one launching a coherent DSP that can do a single carrier 1.6 Tbps wavelength. To accomplish this, the company is not only going with a more advanced semiconductor node process (3 nm rather than 5 nm), but is also developing advanced coherent drivers and receivers that can push the transponder to 200 Gbaud (no other company has 200 Gbaud drivers at this time). To remove any concerns about timing and progress of the WaveLogic 6e development, especially since it is using such an advanced semiconductor process node, Ciena took the time to detail out its development progress behind closed curtains.
Terabit Era Ready
There were a number of announcements by service providers confirming that 1.2 Tbps-capable devices are ready, and that they themselves were looking forward to these new high-performance transponders. Three of those announcements were as follows:
Windstream did a field trial in a live network to confirm technology readiness in a real world setting. The field trial used the Acacia CIM8 based on the Jannu DSP and showed that a 1 Tbps wavelength could be carried over at least 541 km with excess performance margin. The wavelength operated over SMF28 fiber with approximately 6 WSS filters along the way.
GlobalConnect did a field trial of Nokia’s PSE 6s in a live network. In this trial, GlobalConnect tested the 1.2 Tbps-capable DSP for a long haul route, operating at a wavelength speed of 800 Gbps. The route length achieved in this trial was 2,019 km.
China Mobile did a field trial of the Acacia CIM8 in an ultra-long-haul application, demonstrating that a 1.2 Tbps-capable transponder can transmit a 400 Gbps wavelength 5,616 km in their live all-optical network.
These field trials are a great demonstration of how the coherent 1.2+ Tbps-capable technology delivers on both higher capacity and longer spans. In the January 2023 Optical Transport five-year forecast report, we projected that demand for 400+ Gbps wavelength shipments will grow at a 40% CAGR, and that one of the key enablers for this growth will be these new sixth-generation coherent DSPs.
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We just returned from MWC after a couple of intense days of meetings. RAN might not be the fastest growing market but from a technology perspective, the pace of change simply remains impressive and the MWC is a great event to witness the progress. Although we are not the right source to capture all of the PR activity involving incremental product announcements, we want to point out a few RAN-related observations that could potentially impact the RAN forecast or vendor dynamics.
Virtualized RAN is gaining momentum
As we now know, vRAN started out slow but picked up some speed in 2022 in conjunction with the progress in the US. The challenge from a forecasting perspective is that the visibility beyond the greenfields and the early brownfield adopters is limited, primarily because purpose-built RAN still delivers the best performance and TCO. As a result, there is some skepticism across the industry about the broader vRAN growth prospects.
During MWC, we learned four things: 1) Near-term vRAN visibility is improving – operators in South Korea, Japan, US, and Europe are planning to deploy vRAN in the next year or two. 2) vRAN performance is firming up. According to Qualcomm, Vodafone (and Qualcomm) believes the energy efficiency and performance gap between the traditional and new Open vRAN players is shrinking (Vodafone publicly also praised Mavenir’s OpenBeam Massive MIMO AAU). Samsung also confirmed (again) that Verizon is not giving up any performance with Samsung’s vRAN relative to its purpose-built RAN. 3) vRAN ecosystem is expanding. In addition to existing vRAN suppliers such as Samsung, Ericsson, Mavenir, Rakuten Symphony, and Nokia announcing improvements to their existing vRAN/Cloud RAN portfolios, more RAN players are jumping on the vRAN train (both NEC and Fujitsu are expecting vRAN revs to ramp in 2023). And perhaps more interestingly, a large non-RAN telecom vendor informed us they plan to enter the vRAN market over the next year. 4) The RAN players are also moving beyond their home turf. During the show, Nokia announced it is entering the RAN accelerator card segment with its Nokia Cloud RAN SmartNIC (this is part of Nokia’s broader anyRAN strategy).
256T256R Massive MIMO
For a technology that was initially viewed as being mostly fit for high-traffic locations, Massive MIMO has come a long way in just a few years, ramping at a much faster pace than initially expected. As we recently outlined in the Massive MIMO 2022 blog, the days of exponential growth are in the past but there is still Massive MIMO upside ahead to support TDD MBB expansions in the less advanced markets, FDD hotspot deployments, FWA, and TDD product refresh to take advantage of continuous product improvements such as wider IBW, lower power consumption, smaller form factors, and more transceivers/antenna elements.
With limited new sub-7 GHz spectrum on the horizon, improving the spectral efficiency using more didoes and transceivers will continue to play a fundamental role with 5G, 5G-Advanced, and 6G. This is not a surprise. However, since we previously assumed the 128T128R would be the de-facto configuration for the 6 to 7 GHz band, it was somewhat surprising to see Huawei’s 256TRx prototype in the booth (ZTE had a 128T128R AAU in its booth).
Private 5G ecosystem is evolving
Private 5G is running behind schedule. We recently adjusted the private wireless forecast downward to reflect the current state of the market. Still, the slow uptake is not dampening the enthusiasm for private wireless. If anything, the interest is growing and the ecosystem is evolving as suppliers with different backgrounds (RAN, core, Wi-Fi, hyperscaler, in-building, SI) are trying to solve the enterprise puzzle. Below is a summary of the private RAN, core, and SI/services providers that we are currently monitoring.
More suppliers want a piece of Europe
Per our 4Q22 RAN report, Ericsson, Nokia, and Huawei collectively accounted for around 95% of the European RAN market in 2022. Other RAN suppliers have tried to expand their respective footprints over the past couple of years without much success. One of the takeaways from the MWC discussions is that activity with the smaller suppliers is on the rise:
Samsung highlighted its vRAN/Open RAN progress with Vodafone in the UK, Germany, and Spain and remains optimistic its European RAN revenues will soon become more material.
NEC started recognizing European RAN revenues in 2022 (primarily driven by 1&1 in Germany).
Fujitsu believes its European RAN growth prospects will improve in 2024.
Mavenir has 10 K brownfield Open RAN sites in the pipeline for 2023/2024 – Deutsche Telekom is part of the mix, however, the exact upside in Europe remains unclear.
Rakuten Symphony recently estimated its Open RAN pipeline is worth around $2B (half of the total pipeline). We don’t know the size of the European component. However, the company recently reported that nearly half of the # (not value) of prospecting clients (for RAN and non-RAN) are located in Europe per the chart below.
While it is unlikely that management over at Ericsson, Nokia, and Huawei are losing a ton of sleep at this juncture from these announcements, it might be worthwhile to check back in a year if the collective share of the top 3 is still around 95%.
Skepticism is on the rise
Not surprisingly, disconnects between vision and reality are common when new technologies are introduced. Even if this is expected, we are sensing more frustration across the board this time around, in part because RAN growth is slowing and 5G still has mostly only delivered on one out of the three usage scenarios outlined in the original 5G use case triangle. With 5G-Advanced/5.5G and 6G starting to absorb more oxygen, people are asking if mMTC+/mMTC++ and URLLC+/URLLC++ are really needed given the status of basic mMTC and URLLC. Taking into consideration the vastly different technology life cycles for humans and machines, there are more questions now about this logic of assuming they are the same and will move in tandem. If it is indeed preferred to under-promise and over-deliver, there might be some room to calibrate the expectations with 5G-Advanced/5.5G and 6G.
And most importantly, this was our first live MWC event since 2019. It was great to be back and meet people in person without any Covid restrictions. The energy level at the show was amazing – now if this energy could somehow start showing in the RAN numbers, that would be even more exciting.
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Preliminary findings suggest Massive MIMO RAN revenues reached new record levels in 2022. At the same time, year-over-year comparisons are becoming more challenging and the implications are that growth is slowing. With Massive MIMO revenues expanding at a low-single-digit rate in 2022, the timing is right to review market status and near-term expectations.
Market Status
For a technology that was initially viewed as being mostly fit for high-traffic locations, Massive MIMO has come a long way in just a few years, ramping at a much faster pace than initially expected. Our most recent analysis suggests global Massive MIMO RAN revenues, which includes baseband and radio revenues for large-scale antenna systems featuring > 8T8R sub-6 GHz LTE and NR radio configurations, increased more than 20-fold between 2018 and 2022, propelling total Massive MIMO revenues to reach new record levels.
Helping to drive this output acceleration is the fact that Sub-6 GHz Massive MIMO combined with larger swaths of upper mid-band spectrum delivers superior coverage, capacity, performance, energy per bit consumption, and TCO tradeoffs relative to both the low-band and mmWave spectrum. Consequently, the Massive MIMO vs. Non-Massive MIMO ratio is typically high in the upper mid-band.
Regional adoption has been fairly broad based, driven by synchronized upper mid-band rollouts in especially the Asia Pacific region. Wide-band 5G deployments are now ramping up in Europe and North America. But as Ericsson recently pointed out, upper mid-band coverage in Europe is still just around 15% to 20%, significantly lagging the global average.
Most initial modeling was focused on the incremental capacity upside with Massive MIMO. But as we now understand, it is actually the coverage benefits with Massive MIMO and the ability for operators to leverage their existing site assets and realize nearly equivalent 5G coverage with the upper mid-band as with 4G that has been the most important attribute of Massive MIMO in this initial deployment phase.
In addition to the economic benefits, the ability to leverage the existing macro grid is also reducing the time required for network construction, which generally follows a similar pattern with operators addressing high-traffic areas first before transitioning towards less dense populations. Larger countries can realize nationwide coverage in around ~3 years while smaller countries are able to upgrade the first base layer in 1 to 2 years.
Although Massive MIMO requirements and performance will vary depending on a confluence of factors including the inter-site distance (ISD), traffic characteristics, and vertical user spread, operators in China have so far been favoring the capacity, coverage, and performance benefits with the 64T64R configuration while the 32T32R configurations have been favored outside of China, though continued innovation will likely change how operators think about this mix. One of the Korean operators is reporting performance and capacity gains in the order of 30% after upgrading the radios from 32T32R to 64T64R. And with RAN still accounting for around 15% of the overall site opex and wireless capex, the price premium with the 64T64R is justified in most scenarios with ISDs of 500m or less.
Source: Huawei
As the ISDs are increased, the relative gains slow – Per Ericsson’s Massive MIMO handbook, the relative cell-edge throughput gains with 64T64R vs. 32T32R are in the single digits as the ISD approaches 750m, boosting the business case for the 32T32R configuration.
Source: Ericsson
At the same time, the 64T64R business case for greater ISDs is expected to evolve over time as technology advances and prices improve. And in some cases, vendors believe this reality is already here. Huawei recently released data suggesting the coverage and capacity gains between the 64T64R and 32T32R can already be justified in some 700m ISD scenarios.
Source: Huawei
Forecast
Following the surge in global Massive MIMO investments between 2018 and 2021, preliminary findings suggest growth slowed in 2022, in part because of the state of upper mid-band 5G and more challenging comparisons in the more advanced markets such as China, South Korea, and the US. As we look forward, Massive MIMO investments are expected to remain elevated, however, global growth is projected to soften as output acceleration in Europe, North America, and parts of APAC will be offset by slower growth in the advanced markets. Taken together, we are forecasting Massive MIMO revenues to increase by nearly 20% by 2024, relative to 2021 levels.
In addition to MBB, FWA will also play an important role in the broader broadband toolkit as operators figure out the right balance between the capacity requirements and the overall profitability for the various FWA segments. Huawei estimates that the improved coverage with its latest MetaAAU product can have a material impact on the FWA business case.
Next, Massive MIMO will also play a role in supporting 2 GHz FDD. This spectrum is more challenging, however, the vendors are doing everything they can to improve the form factor. And while the 2 GHz FDD Massive MIMO market will not be as large as the upper mid-band TDD market and likely be confined to hotspot scenarios, it is worth pointing out that Huawei has already deployed 20 K+ FDD-based Massive MIMO AAUs.
Finally, continuous product improvements are expected to shorten the lifespan relative to the standard RRU products – some operators are already swapping out Massive MIMO radios deployed just two years ago for newer more efficient, and higher-performing radios.
Preliminary MWC announcements suggest Massive MIMO remains a priority from an R&D perspective as the products are evolving rapidly with incremental advances improving the form factor, weight, power output, performance, bandwidth, cost, and price.
Not surprisingly, the form factor has improved rather significantly with leading vendors now offering 64T64R radios weighing just 17 kg to 20 kg, down from the 40 kg+ range just a few years ago. And both Ericsson and Huawei are now offering 32T32R AAUs weighing 12 kg and 10 kg, respectively, ideal for footprint-optimized capacity. Nokia is offering a 400 MHz BW 32T32R AAU weighing 17 kg.
Even though the Massive MIMO concept is relatively new, some vendors are already releasing 3rd generation products – Huawei’s latest MetaAAU utilizes 6 dipoles per radio chain. So compared with the traditional 192 array AAU, the extremely large antenna array (ELAA) uses 384 dipoles.
Source: Huawei
Also, Ericsson recently also announced a new range of ultra-wideband Massive MIMO radios with IBW spanning 600 MHz in a 30 kg form factor. Similarly, Nokia also announced its next generation Massive MIMO Habrok powered by ReefShark radios.
Source: Ericsson
In short, Massive MIMO will continue to play a pivotal role with both 5G and 5G-Advanced, and the competitive landscape will remain fierce. The days of exponential growth are in the past but there is still more upside ahead to support TDD MBB expansions in the less advanced markets, FDD hotspot deployments, FWA, and TDD product refresh.
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With 2022 now almost in the rear-view mirror, the timing is right to review how the RAN market is unfolding, and more importantly, what is on the horizon for 2023. In this blog, we will review three projections regarding the overall RAN market, 5G, and Open RAN.
1) Total RAN to decline in 2023
In retrospect, the market has evolved over the past year. Going into 2022, we projected that the RAN market would advance at a mid-single digit rate in 2022 in nominal USD terms, supported by strong growth in North America and modest growth in China, Europe, and other parts of the Asia Pacific.
While we don’t have the complete picture yet as we only have data for the 1Q22-3Q22 period, it is safe to assume that the high-level projections for both China and North America were reasonable, barring any major 4Q22 surprises. Still, we also need to recognize that RAN investments in Europe and Asia Pacific excluding China are tracking below our projections for the 1Q22-3Q22 period.
This gap in the output acceleration is primarily driven by forex fluctuations and prices – base station volumes and overall 5G activity are mostly in line with expectations, but the revenue per base station was impacted as the USD gained against most major currencies throughout 2022.
As we look into 2023, the regional mix will evolve. India, which is a smaller part of the RAN market in 2022, will be one of the bright spots going forward. Per our recently published 5-year RAN forecast, we are modeling an intense 5G deployment phase over the next 3 years, and this will already show up in the numbers this year and almost be enough to offset more challenging comparisons in North America and China.
2) 5G RAN will grow at a double-digit rate in 2023
As we now know, 5G investments have increased at a remarkable pace since the first NR networks were launched back in 2018, resulting in a 5G ascent that has been much steeper and broader relative to what we experienced with previous technology shifts. The challenge now is that the 5G comparisons are becoming more challenging in the advanced markets. And the implications are that 5G RAN growth rates will subside somewhat going forward.
At the same time, our long-term thesis still holds. We are still in the early days of the broader 4G-to-5G transition and incremental capex will be required beyond the initial coverage layer to support all the frequency flavors and use cases. In other words, the days of exponential 5G RAN growth are clearly in the past, however, 5G RAN revenues are still expected to advance at a double-digit rate in 2023.
3) Open RAN to account for 6% to 10% of RAN Market in 2023
The Open RAN movement has come a long way in just a few years, propelling Open RAN revenues to accelerate at a faster pace than initially expected. Going into 2022, we projected Open RAN would comprise around 3% of the full-year 2022 market. Per our 3Q22 RAN report, our analysis indicates Open RAN revenues surged at a much steeper pace than expected spurring Open RAN to comprise a mid-single digit share of the full-year capex.
Meanwhile, the underlying message that we have communicated now for some time has not changed. The early adopters are embracing the movement, however, there is more uncertainty when it comes to the early majority operator and the impact on the supplier dynamics. Per the 3Q22 RAN report, the rise of Open RAN has so far had limited impact on the broader RAN market concentration—we estimate that the collective RAN share of the top 5 RAN suppliers declined by less than one percentage point between 2021 and 1Q22–3Q22.
Still, our position remains unchanged. Even with the underwhelming progress by the smaller Open RAN focused suppliers and the challenges ahead to cross the chasm, we believe this will not be enough to derail the movement toward openness. Following the surge in 2022, Open RAN radio revenue growth will slow in 2023, reflecting a more challenging comparison with the early adopters.
In short, it will be an interesting year. As with any forecast, there are risks. Please come back as we update the RAN analysis to reflect all the latest developments.
There were a number of announcements by service providers confirming that 1.2 Tbps-capable devices are ready, and that they themselves were looking forward to these new high-performance transponders. Three of those announcements were as follows:
