Overview:
With the continued exponential growth in mobile data traffic, one would expect a substantial increase in sales of mobile (2G/3G/4G) network infrastructure equipment. Not so, according to Infonetics Research, which released excerpts from its 3rd quarter 2012 (3Q12) 2G, 3G, 4G (LTE and WiMAX) Infrastructure and Subscribers market share and forecasts report, which tracks 2G, 3G, and 4G (LTE and WiMAX) network equipment and subscribers.
“LTE was indeed the lone bright spot this quarter, as the rest of the mobile infrastructure market dragged the overall market down, led by a sharp drop in CDMA gear.” said Stéphane Téral, report author and principal analyst for mobile infrastructure and carrier economics at Infonetics Research. Infonetics wrote that in 3Q12, the global 2G/3G/4G (including LTE and WiMAX) infrastructure market was down 4.7% from the previous quarter and down 4.0% from the year-ago quarter.
How could that be since operators were expected to continue to build out their 2G/3G/4G networks, especially 2G and 3G which are still the the most widely deployed mobile networks? Mr. Teral thinks it’s because most of the wireless build out has already occurred.
In an email exchange to discuss the widespread lack of interest in wireless infrastructure, Stéphane wrote,
“The fact is that the wireless infrastructure on this planet is essentially built out and to find other opportunities, you need to find another planet. That’s what I’ve been saying for some time! 75% of total 2G/3G subscribers are still on GSM, meaning a long migration process to 3G, despite all headlines and deceptive marketing hype about 4G (LTE. WiMAX, HSPDA+), which technically is not 4G!”
Mr. Teral added,
This migration will be less capital intensive as network construction of the past two decades was. That’s why the mobile network infrastructure market is stagnant at best and definitely not sexy. Even LTE won’t pick up the slack and at current pace of investment, it’s going to be extremely difficult for early adopters to recoup the cost if consumers are not willing to pay more for bandwidth.”
However, Stéphane is optimistic for the mobile infrastructure market in 2013. He wrote,
“Despite the current lethargy, we anticipate a strong pipeline moving forward, with 2013 fully charged with a good mix of 2G, 3G, and LTE equipment purchases. China Mobile alone has a nationwide TD-LTE rollout plan of 100,000 eNodeBs.”
Mobile Infrastructure Market Highlights:
- In 3Q12, the global 2G/3G/4G (including LTE and WiMAX) infrastructure market was down 4.7% from the previous quarter and down 4.0% from the year-ago quarter
- Nokia Siemens Networks jumped from #4 to #2 in the LTE equipment market after more than doubling its LTE revenue in 3Q12, significantly closing the gap with market leader Ericsson and passing Alcatel-Lucent and Huawei
- From the year-ago 3rd quarter, global LTE infrastructure sales are up 131%
- Infonetics forecasts LTE subscribers to grow nearly 5-fold to top 51 million worldwide in 2012
- The Global Mobile Suppliers Association expects 166 commercial LTE networks by year end
- CDMA2000 continued its freefall in 3Q12, down 16% sequentially and down 46% year-over-year, reflecting the beginning of the long declining tail curve
- The WiMAX ecosystem is shrinking, with fewer vendors continuing to support the technology as they stake their long-term futures on LTE (this is no surprise with almost all the WiMAX network providers, e.g. Sprint and Clearwire, moving to LTE rather than WiMAX 2.0 or IEEE 802.16m)
Report Synopsis:
Infonetics’ quarterly 2G, 3G, 4G (LTE and WiMAX) report provides worldwide and regional market size, vendor market share, analysis, deployment trackers, and forecasts for LTE, WiMAX, and 2G/3G mobile network equipment and subscribers. The report tracks more than 50 subsegments of the market, including radio access networks (RAN), base transceiver stations (BTSs), mobile softswitching, packet core equipment, and E-UTRAN macrocells. Vendors tracked include Airspan, Alcatel-Lucent, Alvarion, Cisco, Datang Mobile, Ericsson, Fujitsu, GENBAND, HP, Huawei, NEC, NewNet, Nokia Siemens Networks, Proxim, Redline Communications, Samsung, UTStarcom, ZTE, and many others.
Other Opinions:
Market intelligence firm IHS iSuppli uses a different set of metrics to track the mobile communications market. IHS defines mobile communications equipment factory revenue as what manufacturers earn from the sale of devices into the channel – in this case, mobile communications equipment like smartphones and other handsets. The category also includes wireless infrastructure gear such as routers.
According to IHS iSuppli, the market for mobile communications equipment will grow by 13% this year, propelled by climbing shipments of mobile handsets and tablets, particularly devices supporting the 4G long term evolution (LTE) wireless standard.
Total factory revenue from original equipment manufacturers making mobile communications equipment is projected to reach $376 billion by year-end, up from $334 billion in 2011. LTE spending will be double that of 2011 at $8bn.
Next year, overall revenue for mobile communications equipment is forecast to rise to $444bn. Driven by mobile broadband, the five-year compound annual growth rate until 2016 is expected to amount to 11%. The market for ICs for mobile infrastructure will be $74bn this year up 5% on 2011.
Meanwhile, ABI Research said that wireless infrastructure equipment revenues decreased 10.3 percent in the third quarter of 2012 to $11.3 billion from the same quarter one year ago. Third quarter wireless infrastructure equipment revenues were down 1.0% from the second quarter of 2012, the firm said in a press release.
http://www.abiresearch.com/press/nokia-siemens-networks-and-samsung-stand-out-in-st
“There is no question that the RAN market has been squeezed in 2012, although we have seen improvements in the 3Q, being 8 percent down from the 14 percent decrease we saw in 1Q,” said Aditya Kaul, practice director for mobile networks at ABI Research. “Even with 4Q bringing in the traditional Christmas cheer, 2012 will end up 10 percent down at the very least, which is bound to cause market share shifts especially in the top 3,” Kaul added.
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What About the Small Cell?
What about the increased use of small cells and nano base stations to facilitate spectrum re-use and hence deal with the mobile data capacity crunch? Won’t that boost the mobile infrastructure market?
In an earlier report co-authored by Mr. Teral and Richard Webb, Infonetics debunked the hype around small cells by stating,
“Small cell market is not big enough for all who want to play in it.”
“In terms of units, yes, small cell numbers can be big, but don’t get too excited – there are a lot of serious issues that need to be resolved, and some that cannot be resolved,” Mr. Teral said. “Let’s say an operator has thousands of small cells; how do you manage them all? How do you backhaul them? When we talk to carriers, backhaul is always the biggest issue. And then of course they have to get interference under control. Don’t get me wrong; there is no question that a small cell market exists and it is growing fast. But the volumes will not be high enough to support the number of vendors trying to get into the small cell space. There is no ‘El Dorado‘ in small cells. A vendor battle is looming and not everyone is going to win.”
Co-author Richard Webb, directing analyst for microwave and mobile offload at Infonetics, added:
“Public access femtocells already make up more than 70% of all small cells shipped worldwide. Deploying femtocells in public metro spaces could help mobile operators address the data offload challenge. As operators utilize LTE femtocells to complement coverage and capacity for LTE macro deployment, the 4G femtocell segment will take off, becoming the main growth engine of the small cell market by 2014. In the meantime, carrier WiFi will be a faster-growing solution for offload, as it is often less complex to deploy compared to cellular-based small cells.”
Small Cell Market Highlights:
- The number of small cell units sold is forecast to grow nearly 40-fold from 2011 to 2016, including 3G microcells and picocells, 4G mini eNodeBs, and 3G and 4G public access femtocells
- Infonetics expects global small cell revenue to grow at a 73% compound annual growth rate (CAGR) during the 5 years from 2011 to 2016
- Asia Pacific dominates the small cell market and will continue to do so through at least 2016
- Issues affecting small cell deployment vary from region to region and include backhaul link quality and affordability, inter-cell interference, spectrum availability, and regulatory restrictions
17 replies on “Infonetics: Mobile Infrastructure Market DOWN in Quarter & Year Except for LTE-Growth in 2013; Small Cells not so hot!”
Thanks Alan for pointing out this seeming contradiction as to how infrastructure spending can be decreasing, while we are in the middle of a “spectrum crunch.”
It does look like small cells will serve to in-fill and allow re-use of spectrum, however, at a capital cost that is much lower than traditional towers. LTE and small cells seem to be synergistic.
I wonder if Distributed Antenna Systems count as part of the “small cell” category or if it is an entirely different category as defined by either Infonetics or iSuppli?
Some believe that Small Cells will solve the mobile data capacity crunch. Alcatel-Lucent: “Small cells could solve the mobile broadband capacity crunch. A number of reports have identified the metro market as one of the driving factors in femtocell growth as operators use femtocells to provide fill-in coverage for congested metro areas..” http://tinyurl.com/asfzuk4
Also: http://www.thinksmallcell.com/Guest-Post/guest-postwhy-i-believe-small-cells-will-solve-the-mobile-data-capacity-crunch.html
Stephane Teral wrote: “Infonetics Research doesn’t cover Distributed Antenna Systems (DAS) in our Mobile Infrastructure report, but we know it’s a $1B/year market – tiny compared to $45 to $50B/year for mobile infrastructure covered in our report that was cited in your article. Small cells will be part of a whole strategy along with carrier aggregation, Self Organizing Networks (SON), etc… to address capacity issues in specific areas.”
Additional feedback, via email, from Stephane Teral who wrote:
“Thanks for sharing the feedback. It’s interesting to see that so many people believe there is a spectrum crunch! And therefore, mobile infrastructure spending should increase! Who’s paying for the infrastructure at a time ARPUs are falling everywhere except in Australia , Canada , the US , and Japan? I’m currently crunching mobile services revenue numbers and there are not pretty: consumers don’t want to pay for mobile communications.
Note that at this point of the 21st century, mobile infrastructure on this planet is essentially built out and the bulk of the market consists of migrating/upgrading 2G network to 3G with LTE-ready gears. LTE makes the headline but that’s not where the big mobile business is.”
If there is not a “spectrum crunch,” then why has AT&T been harping on that point for so long? “There’s just going to be a constant need for additional spectrum,” AT&T Chairman and Chief Executive Randall Stephenson said after he announced the ill fated T-Mobile acquisition. And so many article about it. Here are 2 of many:
http://diversityandcommerce.biz/the-coming-telecommunications-spectrum-crunch-p1789-178.htm
http://forwardthinking.pcmag.com/none/300447-at-t-ahead-of-the-capacity-crunch-but-spectrum-problems-loom
Is this just AT&T propaganda, much like Worldcom saying in 2000 that Internet traffic would double each month?
I haven’t had a chance to read the entire report, but this foundation (which receives funding from the Ford Foundation, Bill and Melinda Gates Foundation and Google, among others) is suggesting there is no spectrum crunch.
http://www.newamerica.net/publications/policy/capping_the_nation_s_broadband_future
Infonetics Research today released excerpts from its new Outdoor Small Cell Mobile Backhaul Equipment Market Outlook. The report forecasts the fastest growing segment of the small cell backhaul market — outdoor small cell backhaul — in 8 discrete categories: the 3 forms of wireline (copper, fiber, DSL) and the 5 forms of wireless (licensed and unlicensed millimeter wave and point-to-point, point-to-multi-point, and non-line-of-sight, or NLOS, microwave). The report tracks and forecasts outdoor small cell backhaul equipment revenue, units, connections (aka links) and small cell sites by medium (copper, fiber, air).
ANALYST NOTES
“There’s been wild speculation on the small cell opportunity — some that lump together small cells with residential femtocells, WiFi hotspots, and in-building and outdoor. Our latest research focuses on just the new, faster-growing outdoor small cell backhaul equipment market,” says Michael Howard, Infonetics Research’s co-founder and principal analyst for carrier networks.
“After fielding several small cell operator surveys and working directly with chipset manufacturers, mobile operators, small cell vendors, and backhaul equipment vendors for more than 2 years,” Howard continues, “we are now able to reliably calculate the size of the market and build realistic forecasts. We expect a cumulative $5 billion to be spent worldwide on outdoor small cell backhaul equipment between 2012 and 2016, with the market kicking into high gear in 2014. This is in addition to the nearly $44 billion being spent on macrocell backhaul equipment during the same 5-year period.”
Richard Webb, directing analyst for microwave, mobile offload and mobile broadband devices at Infonetics and co-author of the report adds, “We expect to see significant shifts in the type of equipment vendors use to backhaul outdoor small cells, with millimeter wave and non-line-of-sight, or NLOS, equipment becoming the top segments of the market by 2016. Millimeter wave equipment has a high capacity (1 Gbps in a single channel) and very low latency, and nearly all of the operators we’ve interviewed are evaluating millimeter wave for small cell backhaul.”
OUTDOOR SMALL CELL BACKHAUL MARKET HIGHLIGHTS
. There is no silver bullet backhaul solution for all small cell deployment scenarios, as each depends on multiple variables, including location, form factor limitations, local regulations, available power and network, and cost
. As a result, mobile operators and backhaul transport providers need a diverse tool kit of solutions for small cell backhaul; Infonetics expects all the outdoor small cell backhaul technologies it tracks to grow at high double- to triple-digit percentage CAGRs through at least 2016
. The number of outdoor small cell backhaul connections is forecast by Infonetics to grow more than 100-fold from 2012 to 2016
. Wireless microwave equipment, including various types of microwave and millimeter wave, accounts for 89% of all outdoor small cell backhaul equipment revenue in 2012, while copper, fiber, and DSL wireline products account for 11%
. Infonetics reported in its related Macrocell Mobile Backhaul Equipment and Services report that macrocell mobile backhaul spending will grow to $9.7 billion in 2016 (report excerpts: http://www.infonetics.com/pr/2012/1H12-Macrocell-Mobile-Backhaul-Market-Highlights.asp)
Everyone talks about microwave or fiber optic backhaul. Here’s another type of backhaul for 3G small cells:
The economics of satellite backhaul are changing to enable 3G rural small cells http://www.thinksmallcell.com/Rural/the-economics-of-satellite-backhaul-are-changing-to-enable-3g-rural-small-cells.html
Lloyd, I think that mkt is too small to make a significant dent in global wireless infrastructure spending
What does SDN mean for telecom infrastructure?
Software-defined networking technology “is likely to reshape the telecom industry in new and interesting ways” and could lead to “significant improvements in the manageability and flexibility of the network,” Lee Doyle of Doyle Research writes. “This promise includes automated traffic management, improved bandwidth engineering and the ability to tailor the network ‘on demand’ to customer needs,” he notes. By using commodity hardware for switches, it will lower capex for telecom infrastructure equipment. That will make it even harder for telecom infrastructure (hardware) vendors to make a profit
http://www.networkworld.com/columnists/2012/121112-doyle.html
I had an aha moment at the Cloud Services Summit a couple of months ago about SDN and what it means is the commodization of network equipment into simple servers. It seems very similar to what has happened with Video on Demand servers, which started as somewhat specialized hardware, but are becoming more and more commodity hardware with really good software. We are seeing that with transcoding devices as well, where the transcoding can be done with the off-the-shelf hardware instead of specialized hardware. Hence, the rise of companies like Elemental Technologies (transcoders) and Wowza (servers) that are disrupting traditional suppliers.
You have to look at the big picture. The government has destroyed the economy. People’s wants and discontent are up but their buying power is down. The market is down for most things.
What does this comment have to do with the article or telecom infrastructure? Companies are not people!
Here’s what Vitesse Semiconductor thinks about small cells in 2013: “2013 will be the main trial year for carriers in outdoor small cell deployment, with carriers increasing RFQs for small cell equipment and their backhaul networks. As outdoor small cells will primarily be deployed on lamp posts and traffic signs in addition to the outside of buildings, they will require connectivity besides fiber. 80% of small cell backhaul will be over microwave or millimeter-wave links. Additionally, more than half of the growth in small cells will come from the APAC region.” http://www.convergedigest.com/2012/12/blueprint-2013-backhaul-gets-smarter.html
Interesting comment from Vitesse Semiconductor, which has no presence in wireless/mobile technologies. Evidently, they are trying to penetrate that market, but not with ICs for 3G/4G. From their website:
“4G/LTE networks, in particular, deploy a completely new Mobile Access architecture that requires very sophisticated packet-processing technology and very accurate synchronization and timing technology. Our Ethernet “Switch Engines” have the same capability as complex and expensive Network Processors (“NPUs”) at half the cost and power. We have best-in-class solutions in the industry to address the Mobile Access network timing needs of our customers with our Synchronous Ethernet (“SyncE”) and IEEE1588v2 PHY- and switch-based timing and OAM solutions. We also offer the lowest power solutions in the industry, which is highly important for LTE deployments including all-outdoor units attached to buildings and small structures that will replace traditional base station and backhaul deployment models.”
https://www.vitesse.com/products/market.php
Unclear to me why Vitesse is now an “expert” on Mobile/Wireless when they don’t have any technology directly related to that market segment!
FT Lex column-12/24/12:
With the rollout of superfast 4G mobile services set to accelerate across Europe next year – spectrum auctions have concluded on much of the continent and will take place shortly in the UK – pricing issues loom large. The region’s mobile operators know they need to bolster revenues. In spite of modest usage growth in recent years, pricing pressures have meant falling revenues.
Barclays estimates that underlying European mobile service revenues were on the slide throughout 2012. By the latter half of the year, that was as true in more resilient northern markets as in the recession-hit south.
Is it right to view smartphones as the best hope for reversing these trends? In the US, which is further down the LTE/4G track, most operators have seen average revenue per user rise as customers have upgraded. But the US industry is less fragmented than in Europe, where intense price competition now exists in many markets, making consumers and regulators happy while frustrating operators.
Even so, there are reasons to think that the growth in data services, in particular, could impose more discipline. Traditional voice services carry small marginal costs: a few extra minutes or added texts have been largely free to provide once networks were built.
Data, by contrast, puts extra burdens on a network more quickly. Already, pricing is becoming more complex, with tiered structures, usually based around usage, although Swisscom is using bandwidth. Sadly, though, the operators’ gain may be consumers’ loss: unwrapping one’s Christmas smartphone may be much easier than selecting the best price plan.
http://www.ft.com/intl/cms/s/3/bc45bd4a-4abd-11e2-9650-00144feab49a.html
LTE won’t be the global money maker that many wireless infrastructure equipment vendors thought! Ovum’s 2013 LTE Outlook report says, “the absolute number of commercial networks will continue to grow, subscriber growth will be concentrated in a few countries – Japan, South Korea, and the US.”
That doesn’t augur well for high volume global LTE equipment sales. Hence, it’s very doubtful that the global LTE market will provide wireless infrastructure vendors a revenue boost in 2013. That may cause further financial problems for NSN, Alcatel-Lucent, and maybe even ZTE. Ericsson and Huawei are far more diversified so are in better shape.