4G/5G

Huawei, Ericsson, Nokia and ZTE Setting off a New Round of Competition!

Updated:2019/5/21 16:54

In mid April, GSA published statistical data as of April 8: 39 carriers deployed commercial 5G technology in their existing networks.

It marks the “upcoming 5G era”.

In review of the evolution from 1G to 5G, it is found that many notable mobile communication equipment companies, such as Motorola, NSN, Lucent, and Nortel Networks “ended up with a debacle”.

And in almost every upgrade of mobile communications, new entrants tried to challenge the existing equipment “giants.” This phenomenon has started to take shape even though it is not yet a 5G era at the moment.

Samsung, which “prospered” in the 2G era but missed 3G and 4G opportunities, is expected to “stage a comeback” in the 5G era - it once announced its goal to seize 20% of share on global network communication equipment market and earned 80% of profit from the international market exclusive of South Korea;

In addition, different from the prior generations, 5G core and wireless networks are more virtual and open and traditional telecom equipment manufacturers are confronted with new spoilers including lots of IT giants and small-sized startups that are longing for and itching to pry market resources accumulated by such traditional equipment manufacturers for years; but such entrants are embraced by such aggressive carriers as Lotte, AT&T, and Jio and ORAN Alliance.

On the one hand, it reveals the vitality of the 5G technology innovation. On the other hand, it is bound to aggravate the competition among equipment manufacturers.

Then, will the 5G era make a difference in the pattern of equipment manufacturers? And, will the four equipment manufacturers predominating at one time be able to safeguard their “market positions” to which they spent decades and even hundreds of years rising to?

China Seen as the World’s Biggest 5G Market

Statistics show that from the end of March to April 22, 5G mobile phone calls, including ones between provinces, ones between carriers, and ones between a 5G mobile phone and a 4G mobile phone, were made from a total of 16 provinces/municipalities nationwide in the 5G pilot network for the first time, marking that 5G pre-commercial service is around the corner.

“Key links in the 5G industry chain have been basically available for commercialization,” said Zhang Feng, Chief Engineer of Ministry of Industry and Information Technology at the “2019 Shanghai 5G Innovation Development Summit” on April 23; “China is pushing forward its overall deployment of 5G in order,” said Wen Ku, Head of Communication Development Department of Ministry of Industry and Information Technology, at the “Press Conference on the Development of Industrial Communications Industry in the First Quarter of 2019”.

Looking back, China has had an increasingly greater say in working out 5G standards in mobile communication; it wound up the verification of 5G key techniques, technical solutions and system solutions in the 3-stage 5G technology research and development test; at the moment, it is building a 5G pilot network, gaining 5G networking and optimization experience, improving 5G equipment and solutions, and yielding very good results of 5G pilot application in many areas such as industrial Internet, 5G car networking, intelligent Winter Olympics, and intelligent healthcare. Next, it will address major problems in formal 5G commercialization in 2020 by 5G pre-commercialization.

The preceding “steady steps” taken by China in its campaign for 5G commercialization justify Analysys Mason ranking China on top of “global 5G commercialization readiness rankings” even though South Korea has announced the opening of 5G commercialization. And China holding a lead may be attributed to its huge potential 5G market size. For example, GSMA predicts 5G eMBB connections alone in its “The Mobile Economy 2019” report that more than 29% of 1.4 billion 5G eMBB connections will be initiated from China in 2025.

China as a mobile communication market has the largest population whose spending power is mounting; what’s more, national development trends in the digital economy play a crucial role in facilitating 5G infrastructure building; besides, China’s entire 5G industry is further deepening the demand-innovation coordination and intensifying the training on business demand and incubation with effort to guarantee the maximum income from investment in 5G networking. It is predicted in an article published by experts from China Academy of Information and Communications Technology (CAICT) on March 5 that China will spend RMB 0.9-1.5 trillion on 5G networks in 2020-2025.

China is a huge potential 5G market which all equipment manufacturers are optimistic about. And their optimistic outlook about China is echoed by all the famous market research and consulting firms. “One thing for sure is that China will definitely make a great difference in the global (5G) market pattern after stimulating its own (5G) market due to its huge market size,” said Yang Guang, Director of Wireless Carrier Strategies of Strategy Analytics in the exclusive interview of 5G WeChat public account.

And he also expected Chinese manufacturers including ZTE to make an outstanding performance in their national (5G) market. “In the domestic market, ZTE has evidently more strengths than its foreign rivals. And as China stimulates its own 5G market, it is believed to buoy ZTE's business performance to a great extent.” he analyzed.

Bipartite Confrontation in American 5G Market

Apart from China, the United States is another well recognized big mobile communication market.

At the moment, the U.S. is mainly working on high-frequency (millimeter-wave) 5G commercialization and will also develop its medium- and low-frequency 5G commercialization step by step. It is said that in addition to well-known Ericsson and Nokia, a new name - Samsung is also seen on the latest 5G equipment supplier list published by major American carriers.

However, no reference was made by AT&T and T-Mobile US among others to Samsung in their announcement of 5G large orders concluded; such large orders involved Ericsson and Nokia, which is worth contemplating. An analysis is made on the preceding phenomenon to arrive at reasons set out as follows: the three American carriers build their preliminary 5G commercial networks in the NSA mode based on their 4G networks where devices of Ericsson and Nokia predominate, hence odds are that 5G NSA may use more devices of Ericsson and Nokia; and Samsung is introduced to intensify the competition on the equipment market on the occasion of the 5G era. Evidently, Samsung is used by carriers to nominally check and balance other equipment manufacturers as it is accessed to the American market in a sense for lacking experience in the 3G and 4G eras.

Fierce Competition of the Four Firms in Other 5G markets

As analyzed hereinbefore, Ericsson and Nokia predominate in the American market while two Chinese equipment firms see China as their “base market” beyond doubt.

Apart from China and the U.S., other mobile communication markets in the world also matter to a certain extent. “Regarding the carrier (5G) market, odds are that Chinese manufacturers and non-Chinese manufacturers will be confronted with a fierce competition in the ‘intermediate zone’ apart from China and the U.S. by their dominant positions in such two big markets as China and the U.S.,” said Yang Guang.

In a survey report published by Analysys Mason on April 2, the top 14 states/regions in the “global 5G commercialization readiness” rankings include 6 European states whose proportion is as high as 43%. Therefore, the significance of the European 5G market is self-evident to equipment manufacturers. Though Europe is slow in 5G commercialization, it is progressing step by step. For example, Cristiano Amon, President of Qualcomm, said that Europe has realized the urgency of “5G commercialization” in an interview dated mid April.

Predictably, equipment manufacturers will be confronted with a fierce competition in the European 5G market. Ericsson and Nokia are European firms endowed with a “favorable geographical advantage” and are hence expected to make a remarkable performance in the European 5G market. Without regard to non-market factors, two Chinese equipment manufacturers have many strengths for winning the European 5G market competition.

Chinese firms have spent years working on the European communication market, piling up good public praises, hence the two Chinese equipment manufacturers are at an advantage of “high credibility”. Here are some latest comments on the two Chinese equipment manufacturers. “We choose Huawei because it can provide the best products for particular network area of Vodafone,” said Scott Petty, CTO of Vodafone, a British firm; “After a comprehensive evaluation of the technology and price of four or five mainstream manufacturers and whether the products presented can offer the best support for the company’s business, we are convinced that ZTE is one of the best suppliers and a company with rich experience in execution,” said Benoit Hanssen, CTO of Wind Tre, Italy's biggest mobile communication carrier.

Besides, the European 5G market is complicated to a certain extent with “a variety of needs” in its intelligent transformation and upgrading from gratification of general consumer demand to vertical industry empowering. Regarding the networking mode, European countries may select either NSA or SA; 5G new air interface has a broad range of frequency bands from low frequency, medium frequency to high frequency inclusive.

Now that different countries adopt different 5G major frequency bands and 5G wireless devices in different bands involve different industry chains, major equipment manufacturers emphasize on different things. In the 2.1 GHz band and 3.5 GHz band, Chinese equipment manufacturers have a first-mover advantage and make a high R&D spending on the 5G industry chains herein, hence they have an edge over others regarding products and solutions. In January 2019, the two domestic manufacturers fully verified their 5G end-to-end systems in the NSA and SA laboratory and field tests, whose test results were better than products of international manufacturers in all respects. In high frequency bands such as 28 GHz band and 39 GHz band, international manufacturers make a high R&D spending, hence they are neck and neck with the Chinese manufacturers regarding products and solutions.

Though monopoly of the 5G technology and market is impossible, it is believed that Chinese equipment manufacturers have more strengths than international manufacturers as a whole. After all, the world's only two equipment manufacturers in supply of 5G end-to-end integrated solutions are Chinese firms. According to “Review of 5G technology readiness and commercialization”, a 5G rating report published by a world-renowned market research company GlobalData in October 2018, ZTE has been positioned in the leaders quadrant and entered the first camp of industry with 5G core network, 5G carrier network and 5G wireless network products.

In review of the evolution of mobile communication equipment manufacturing, equipment manufacturers from a bigger home market or base market can take an advantage in increasing technology R&D spending and enhancing R&D cost efficiency and hence are granted with strengths of technology and product cost performance to precede their rivals for some period to seize a considerable share on other international markets (e.g. European market). It explains why the four equipment manufacturers have ultimately stood out in the fierce communication competition that lasted decades to dominate the communication equipment market.

It is expected that the four equipment manufacturers will remain major European market “players” in the 5G era.

More Challenges than Opportunities in the “Open” 5G Wireless Network

The traditional telecom equipment industry is a climbing industry characterized by few participating firms and a closed and demanding equipment system. In the 5G era, all parties take the initiative to explore an “open RAN”, among which, carriers want to lower building, operation and maintenance costs and some IT giants and small- and medium-sized companies want to “seize” the market share of traditional equipment manufacturers.

The exploration can inspire technical innovation but the sustainability of the industry, building, operation and maintenance modes need considering in 5G network building due to the complexity of carrier networks, which determines that an “open RAN” will be a perpetuating process of step-by-step evolution. In addition, two challenges exist.

To start with, implementation is challenging. Wireless has sophisticated functions and diversified standards which are constantly developed and improved and a great difference in base station solutions and interfaces makes it hard to implement standardization and openness based on standardization.

Furthermore, the white box performance need greatly optimizing. Base stations as carriers’ heavy asset devices are demanding on performance and power consumption, hence radio frequency and base band need special rather than universal hardware processing. Studies reveal a huge performance difference between white box wireless and traditional radio equipment. At the current market, the application of a “white box” to a 5G base station seems a long shot and no evidence suggests that the white box is beneficial for industrial development in real means.

Finally, commercializing “white box” in real means costs a long time. To make a “seamless” integration between devices and between functional modules in a device, carriers must have a high system integration capacity and even found their own development teams, indicating a low return on investment (ROI) in the long term.

For example, 3GPP earlier decided to cease its research on specifications in favor of white box RAN development for realizing that the preceding risks would lead to “suboptimum but more expensive” 5G systems.

In conclusion, IT giants and small- and medium-sized companies that are angling aggressively for a market share from the traditional equipment manufacturers by seizing the opportunity of an “open RAN” will not dominate the equipment market in the 5G era.

Continuous Investment as the Key to the Quadripartite Confrontation in 5G Market

As far as the global mobile communication equipment industry is concerned, more than 10 firms contended in the 2G era; 7 firms participated in a fierce competition in the 3G era; Nokia successfully took over Alcatel-Lucent in 2016, marking that a “quadripartite confrontation” involving Huawei, Nokia, Ericsson and ZTE was taking shape in late 4G era. Mobile infrastructure equipment as a conventional telecom equipment is in compliance with general rules of “economies of scale”, where four manufacturers that achieve economies of scale and possess global project delivery capacity and experience stand out from a time-consuming and sufficient competition and other manufacturers find it hard to break this quadripartite confrontation.

And in the 5G era, the four equipment manufacturers are expected to continue to maintain and further increase their share and influence on other markets worldwide by taking advantage of their respective strengths at the Chinese market (Huawei and ZTE) and American market (Ericsson and Nokia) after giving a high spending on 5G techniques, products and solutions in the first decade.

Besides, 5G has a potential for turning into a general purpose technology, indicating that the market demand and product supply in the 5G era will present a “diversification” characteristic. To implement “quick response”, equipment manufacturers still need concentrate on 5G R&D spending. “The size of a domestic market (or base market) to which equipment manufacturers are attributed to and manufacturers’ sustainability in long-term R&D spending are crucial to the manufacturers to maintain a long-term competitiveness and seize a favorable position in the perpetuating 5G competition,” said Yang Guang.

 Source:WeChat Account angmobile
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