The base of telecom infrastructure providers is relatively stable. After 30 years of competition, with merger of Nokia and Alcatel-Lucent in 2015, there are only handful of players namely Huawei, Ericsson, Nokia, and ZTE dominating the global telecom equipment market. Together, they have laid a solid foundation for themselves thus, preventing entry of new players. The question however remains that is there any possibility that 5G would break the existing set up and market equations?
The great potential of 5G is attracting new challengers. As 5G commercial service launched in Korean and the US, Samsung, which is not a very popular brand in the telecom equipment segment, has set up over 50,000 5G base stations in its home market. However, it is most likely that Samsung may not be able to enter the finale, given the fact that its marginal presence over the past few decades. On the contrast, European players Nokia and Ericsson have emerged successful in the 5G market in the US.
Meanwhile, Huawei and ZTE have been operating in various markets like China, Europe, etc., which can be attributed to their end-to-end advantages ranging from 5G technology, products and solutions.
According to the result of China 5G R&D trial (the third stage) driven by IMT-2020, Huawei and ZTE surpassed Nokia and Ericsson, bagging 1st and 2nd respectively in the lab and field test for NSA/SA technologies. It is noticed that Huawei's performance is outstanding, which makes some analysts conclude that it has taken a leading position in the 5G race.
Though there is considerable gap between those relatively smaller firms such as H3C and China Information Communication Technologies Group Corporation (CICT) and traditional players, it is possible that the whole market scenario still would be altered in various countries, regions and even industries in the future given the diversity of market demands and product supply when 5G actually is launched, according to Guang Yang, research director of Strategy Analytics. The crucial contributions of winning 5G race in a long run would be consistent R&D investments and the scale of homeland market, so ZTE and other vendors would benefit intensively once 5G kicks off its operations in China, Yang said.
Furthermore, persistent and huge 5G R&D investment of four giants have brought significant outputs, not only on technical aspects such as Massive MIMO, an important metric of wireless technical competency, that had been applied in 4G network by Huawei and ZTE already, but also in standardization patents layer, where the four giants feature in the top 6 in the 5G international standard patents claim, and the barrier in 2G/3G/4G is even harder to be cracked.
Yang analyzed that the idea of four giants is quite blur. However, there is nobody else but these four giants, who are capable to provide the whole process and entire network solutions, with the capability of global delivery and engineering experience. “But their market shares are extremely unbalanced across multiple markets, which may result in market changes as time goes by.”
Taking Samsung for instance, the reason it is competent to launch 5G equipment is that its consistent following up in 2G/3G/4G period and the commercialization experience in Korean market. But when it comes to large markets such as Europe and China, Samsung does not enjoy a glorious past.
The accumulation consists multiple layers, according to Yang, not only referring to the technical accumulation, but also the ability of products delivery, engineering, service system, and the trust relationship with customers, influence on regulatory policy, financing ability and many other aspects. Only with a huge successful past track record coupled with huge investment, will allow a company to build achieve these capabilities.
However, there are indeed some IT and software firms trying to leverage unique tactic to break the barrier. The real 5G will be based on SA structure, which is a full cloud network, and the introduction of open source technology may crack the traditional supply chain. Athonet, a firm selling 5G core network product on Amazon, gained substantial attention because of winning four awards at MWC this year. Obviously, it cannot be labeled as traditional equipment vendor.
It is quite likely that 5G will be launched initially in three large scale markets: China, the US and Europe, where operators are still more reliable on traditional players considering the high level of complexity in deploying 5G network, Yang pointed out. Huawei and ZTE dominated 3G and 4G network construction in domestic market, and they would maintain and even enhance the advantage when stepping into the 5G era. Especially, the massive scale of China market will help Chinese vendors to improve cost efficiency, increase investment in R&D, adopt more flexible strategy in the international market competition, and raise competition ability in the global market.
The obstacles Huawei faced in the European market this year can fully reflect its competitiveness. Yang said, ZTE's market share in the Western Europe is not high and 5G is certainly a very important opportunity. Meanwhile, the scale of domestic market will also help ZTE to improve cost efficiency, increase investment in R&D.
“But we must also admit that the competition is very fierce and complex in European market. On the one hand, almost all equipment vendors will participate in the European competition on the other hand, some non-market factors have emerged recently. Therefore, opportunities and challenges coexist at this moment,” Yang added.
Regarding the business modes, the first phase of 5G commercialization would more likely be eMBB, followed by URLLC and mMTC. Yang said, eMBB business poses a major challenge for operators to create revenue streams. Meanwhile the URLLC and mMTC may challenge their existing business modes.
The potential of the entire market is enormous and may pose several challengers. However, high-performance telecom products must be the foundation of all 5G business scenarios.
“We have always believed that long-term, sustained R&D investment is critical to maintain the long-term competitiveness of equipment vendors, as well as in the 5G era. I tend to believe that more innovations may take place in the enterprise and vertical market on both technical and business sides in the future,” he stated.
Huawei, Ericsson, Nokia, and ZTE have invested huge amounts of money in 5G. Their R&D investment has accounted for more than 10% of revenue in recent years, which will make them still take the lead in the 5G era. However, when the 5G era actually arrives, there would be some more possibilities that the market landscape will change.