01 Dec The vendor business suddenly looks very different | Light Reading
The communications equipment industry is one of those that lends itself to oligopoly.
The small number of customers are cost-conscious and risk-averse, while suppliers traditionally have had the happy ability to lock in their relationship with legacy kit.
The sector experienced the brief excitement of the telecom bubble and the subsequent downsizing, after which it returned to obscurity while investors and media turned their attention to exciting startups like Google and Facebook.
Now nearly two decades later networks are again thrust into the limelight. 5G is a matter of national security, Chinese firms are sanctioned and US officials want to know why they no longer have a national champion.
Washington’s heavy hand hasn’t been a particularly sensible way to encourage competition, but it has opened the way for smaller players like NEC and Samsung.
As the Wall Street Journal pointed out, Samsung’s 7.9 trillion won ($7.1 billion) multi-year 5G contract with Verizon “compares with the roughly 5 trillion won Samsung’s network business racked up in revenue in all of 2019.”
But the US bans are certainly not the only factor.
The open RAN bandwagon, championed by Rakuten, is gaining speed. Not everyone is convinced but two dozen of the world’s biggest operators are on board.
And it’s not just the RAN. In the core network, Mavenir is now one of the top five suppliers, according to Dell’Oro.
The other decisive factor at play has been China itself and its relish for diplomatic brawling, most notably with India.
Since the June border clash in which several dozen died, India has banned more than 100 Chinese apps. After years of sitting on the fence, it has also decided to exclude Huawei from its 5G rollouts.
That is quite a significant swing vote.
India is nowhere near as big a market as China. Total capex will likely be around $15 billion this year, less than a third of China’s.
But it has enough scale and upside to entice global firms, especially given that its financially stretched operators desperately need someone to deliver Huawei levels of affordability.
In another important step, Japan and India are about to sign an MoU for tech collaboration, the first of its kind between the two governments. Japan will contribute its 5G and fiber expertise, while India will offer its digital IT smarts.
These government agreements might be a long way short of the nitty-gritty of funding, partnering and building out networks, but they carry weight and also point to a changing network supply business with new players.
Already Rakuten has opened a research center in Bengaluru while HAPSMobile, SoftBank’s high-altitude network project, is seeking Indian partners, according to Nikkei Asia.
Suddenly, the vendor business looks a whole lot different.
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Robert Clark, contributing editor, special to Light Reading
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