Telecom's Biggest Vendors - 2Q19: Telco Spending Climate Weakens Again as "Telco NI" Vendor Revenues Fall 1.2% YoY; Supply Chain Shifts Underway but Huawei's 22.1% Annualized Share Still Leads Market, Followed by Ericsson, Nokia, Cisco & ZTE
|発行||MTN Consulting, LLC||商品コード||851278|
|通信事業者向けベンダーの競合分析 Telecom's Biggest Vendors - 2Q19: Telco Spending Climate Weakens Again as "Telco NI" Vendor Revenues Fall 1.2% YoY; Supply Chain Shifts Underway but Huawei's 22.1% Annualized Share Still Leads Market, Followed by Ericsson, Nokia, Cisco & ZTE|
|出版日: 2019年10月01日||ページ情報: 英文||
The goal of this report series is to equip telecom industry decision-makers with a comprehensive view of spending trends and vendor market power in their industry. To do this we assess technology vendors' revenues in the telecom vertical, across a wide range of company types and technology segments.
This report is focused on technology spending by telecommunications network operators (TNOs, or telcos).
Technology vendors record approximately $200B per year in sales of telecom network infrastructure ("Telco NI") to this industry segment. Telco NI spending supports a supply chain of dozens of vendors across the globe. In this edition, we cover 113 vendors selling directly to telcos some mix of hardware, software, and services.
Market growth trending downwards, Huawei still dominates
Annualized network infrastructure sales to telcos ("Telco NI") for the four quarters ended 2Q19 totaled $201.1B, slightly down from $201.7B in the previous quarter. That's due to a fall in YoY growth rates. In 2Q19, single quarter NI revenues across vendor segments were $50.2B, down -1.2% YoY, after falling at a more modest rate of -0.6% YoY in 1Q19. Market revenues were pulled down by a slow ramp-up in 5G revenues, recession worries, a relatively weak China market, and uncertainties surrounding the future of market share leader Huawei.
In the 2Q19 annualized period, the top 5 vendors accounted for 55% of market share in NI: Huawei, Ericsson Nokia, Cisco, and ZTE. Despite its recent troubles, Huawei's share remains over 22%, nearly as much as the sum of Ericsson and Nokia. Samsung's share growth was the largest again in 2Q19, due to 5G's emergence in its core market. As 2019 has progressed, Huawei's political and supply chain problems have worsened. The Chinese vendor is facing some serious legal challenges affecting its future prospects - it's not just a result of Trump's trade battles. In the short term we expect lots of M&A and new JV activity aimed at helping cope with (or even better, profit from) this changing reality.
In earnings calls, 5G was the highlight but few agree on when and how it will benefit their specific operations. Samsung has already gotten a 5G kick, primarily from its home market. Other mobile RAN suppliers focus on the number of contracts and/or "commercial engagements" entered into with telcos. Ericsson has been a bit more aggressive than others in going after early 5G business, possibly to the detriment of margins. Nokia expects a good 4Q19 but in the meantime is revamping efforts to attack non-telco opportunities. Cisco continues to struggle in the telco market and sees 5G as a long-term opportunity but weak capex in its strongest markets - and political challenges in China - both pose problems. ZTE has recovered nicely from a weak 2018 but its main upside remains in China, where capex will be under pressure from new network-sharing arrangements.
IT services providers, one of three vendor types we track, are generally positive on outlook as they see opportunities from a telco shift to more software & services (e.g. digital transformation) spending, but growth rates are modest. The cabling & connectivity vendor segment (CCV) is strong now. However, fiber cable spending tends to go in cycles and is impacted heavily by government regulations. Corning continues to do well due in part to a wide base of customers and ongoing M&A activity. Vendors focused on the data center and/or implementing SDN/NFV based architectures and open networking are generally positive but remain reliant on telco capex growth, which has been weak.
Ciena may have the strongest outlook of all, as it is positioned in a sweet spot for market growth and has a good track record of acquisitions - which will be increasingly important as some vendors struggle amidst weak capex and supply chain shifts. The China-US trade battles have not only hurt Huawei, they also have hit western NEPs' ability to access the China market easily for manufacturing, R&D, component supply, and sales to Chinese telcos.
Those waiting for a grand resolution to US-China disputes surrounding Huawei will be disappointed - the company's problems did not arise with Trump and his trade war. Concerns about Huawei's private company origins and independence from the Chinese state are fairly bipartisan in the US, and shared by a number of European governments.
Yet Huawei certainly isn't going anywhere; it has the broadest portfolio of products in the industry, and its 22% market share in Telco NI is just a bit lower than the sum of Ericsson and Nokia and Ericsson combined. Since its CFO's arrest, the vendor has hardly backed away from its ambitions - and the Chinese government has made clear its support for Huawei's long term growth.
As 5G becomes a reality and Huawei still has issues, vendors elsewhere in Asia are looking to exploit uncertainty. That doesn't just mean other RAN suppliers; it involves fiber, transmission, router/switch, and other product areas, and software/IT services. It also involves many countries: India, Korea, Taiwan, and Japan all host competitive players in the telecom network infrastructure space. None approach the scope of even a mini-Huawei but telcos are more willing to buy a la carte nowadays.
India is interesting because its latest Telecom Policy (2018) explicitly called for the development of its telecom equipment sector. Well before the Huawei crisis, India's Telecom Secretary, Aruna Sundararajan, argued that India should embrace 5G aggressively, not just for services but to help develop India's export sector. India is a big enough market that the big global RAN vendors are making local investments in R&D and manufacturing, and partnering locally. Ultimately this could expand prospects (and product lines) for companies in other segments like Sterlite and Tejas. It could also help open networking specialist Radisys, now owned by India's largest telco Jio.
India becomes more interesting in terms of network infrastructure when you consider Taiwan. Its local tech trade association, TAITRA, is pushing hard on India for both export and partnership opportunities. India's traditional strength (workforce-wise) has been in software (e.g. Wipro, Tech Mahindra), while Taiwan is strong in electronics manufacturing, chips, displays, and sensors. There are some partnership opportunities that look attractive on paper. Already Taiwan's Foxconn is moving some iPhone production to India, for instance. But politics are a factor in the India-Taiwan avenue. And if politics is what motivates a deal, then a new political environment could make the deal unstable, so things are likely to go slowly here.
We expect the telco NI spending climate in 2019 to remain challenged. There is upside from increased 5G spending, but recession warnings are growing. Recessions tend to his telco revenues hard. A slowdown in telco revenues would result in both additional layoffs and a slower growth rate in 5G spending. Huawei's latest troubles will also slow down the procurement process for many telcos as they reevaluate priorities and assess risks. Currently many European and some Asian operators are re-considering the degree to which they've tied their network fortunes to a single vendor.