|Mobile 5G Technology Leadership 2019 Part 4: InfrastructureEquipment Providers|
>> Who Is 'Really' Leading in Mobile 5G, Part 4: Infrastructure Equipment Providers
Senior Analyst: Networking Infrastructure and Carrier Services
Moor Insights and Strategy
July 19, 2019,
There’s lots of buzz these days around 5G and what it promises to deliver beyond today’s 4G LTE networks. Billions of dollars are being spent globally by carriers to upgrade their core and access networking infrastructure to support new services for consumers and businesses alike. This article is Part 4 of our series, focusing on present 5G infrastructure leadership. In Part 1, we analyzed 5G intellectual property and patent leadership. In Part 2, we dug deeply into the 5G chipset ecosystem, and in Part 3 we examined manufacturers integrating 5G components from others into smartphones, notebook computers, hotspots, and other emerging form factors.
What constitutes infrastructure?
Before getting started, it would be helpful to define what constitutes infrastructure. For the purpose of our analysis, we include core network and radio access network components such as base stations and antenna arrays. Let’s take a look at each:
Core network components serve as the central part of a cellular network and knit together mobile, fixed, and converged connectivity in order to ensure more consistent user experience. For 5G, they include a higher degree of hardware disaggregation from a compute and storage perspective as well as software programmability over LTE networks. Companies that deliver industry-standard server platforms such as Dell EMC, Hewlett Packard Enterprise, and Lenovo have made significant inroads into the telecommunications space and have brought disruption from a cost and deployment agility perspective.
Some of the new capabilities that have come to core networking include machine learning (ML), artificial intelligence (AI), virtualization (NFV), and software-defined networking (SDN). Benefits include faster time to deployment, self-healing for improved uptime, and network slicing aimed at guaranteeing the quality of new service and new monetization opportunities for carriers and service providers.
Radio access network components, on the other hand, play an important role in how your smartphone or mobile device communicates across a cellular network.
Base stations are fixed points of communication within a cellular network that are designed to cover a specific geographic area. Based on the need for coverage, they can take the form of macro-cells that cover a wide area, micro-cells that are used for densification of coverage in highly populated areas, and pico-cells that boost coverage within buildings. From an outbound perspective, they communicate with smartphones, IoT devices and sensors, and soon automobiles. From an inbound perspective, the connect to the core network.
Antenna arrays are attached to base stations covered above to amplify coverage. For 5G, there are new requirements given its ability to deliver significantly lower latency and improved throughput over LTE with Massive MIMO factoring heavily. MIMO stands for “multiple-input, multiple-output” and combines a large number of antennas to improve broadcast efficiency. Base stations and antennas combine to constitute what’s referred to as the radio access network connecting devices to a core network.
Defining 5G infrastructure leadership
There are several factors we have determined as critical in identifying infrastructure leadership in 5G. First, is a provider shipping equipment that is pre-standard or meets “NR” new radio standard requirements. Second, if shipping any publicly announced deployments by the carrier. Third, the depth and breadth of spectrum support spanning low band or “sub 6” to mmWave. Fourth, any unique differentiation such as custom silicon or broader ecosystem program participation. Fifth and final, if not currently shipping any publicly announced trial activity by the carrier. Based on the above criteria, we evaluated and segmented infrastructure providers into two categories (single-purpose and multi-purpose) and within each identify leaders, followers, and laggards.
Single-purpose vs multi-purpose infrastructure providers
Single-purpose refers to traditional infrastructure providers that have historically deployed proprietary equipment to support wireless network buildouts. In our analysis, we included Ericsson, Huawei, Nokia, Samsung, and ZTE in this category, and all of these manufacturers supply the aforementioned defined infrastructure.
Multi-purpose refers to a mix of enterprise networking companies as well as industry-standard compute, storage and fabric providers that have extended their reach into the telecommunications industry by packaging and certifying their hardware, software, and services. For purposes of our analysis, we included Cisco Systems, Dell EMC, Hewlett Packard Enterprise/ Aruba, and Lenovo in this category. Note that these manufacturers don’t supply traditional base stations and antenna arrays but do participate with its products in parts of the core and network edge.
Single purpose provider evaluation
Ericsson is currently shipping 5G infrastructure solutions that span mobile NR, inter-band carrier aggregation, as well as core and integrated radio solutions that include its AIR 1636 and 1623 form factors. From a deployment perspective, the company claims 23 5G contracts that include all four tier one carriers in the US, Vodafone UK, Swisscom, and Telenor in Europe, KT and SK Telecom in South Korea, SoftBank in Japan, and Telstra in Australia. Ericsson supports a broad range of spectrum and its Spectrum Sharing solution leverages scheduler algorithms to facilitate carrier deployments of 5G alongside current LTE networks.
I believe Ericsson is also doing a good job of differentiating itself by investing into AI and open source initiatives through the Linux Foundation to deliver agility, lower operating expense structures, and improved network uptime for operators. From an AI perspective, this is evidenced by embedding intelligent algorithms in base stations as well as equipping field technicians with augmented reality cognitive assistance for improved troubleshooting. Ericsson also has a strong historical incumbent position and given its recent financial performance turnaround is well-positioned to capitalize on 5G.
Samsung is currently shipping 5G infrastructure solutions that span pre-standard and NR fixed wireless access (FWA) and mobility services. From a 5G base station standpoint, the company claims over 53,000 units have been shipped to South Korean operators including SK Telecom, KT, and LG Uplus. Over the past 12-18 months, Samsung has aggressively expanded out of its core Asian markets to supporting both 5G FWA and mobile deployments in the U.S. for Verizon dating back to October 2018. Sprint is also expected to follow suit after the conclusion of a field test of massive MIMO to support simultaneous LTE and 5G services for the carrier that hopes to merge with T-Mobile this year.
From a spectrum support perspective, Samsung’s 4T4R and 2T2R radio units support the entire breadth of mmWave spectrum as well as sub 6 with the 8T8R that is currently being deployed in Korean commercial 5G NR deployments. On the differentiation front, Samsung has significant capabilities in semiconductors as evidenced by its custom chipsets and also has depth in key 5G use case verticals such as automotive and manufacturing of not only 5G devices but also consumer electronics and white goods. Pointing to the latter, Samsung and AT&T recently launched a smart manufacturing testbed positioned as a “5G Innovation Zone” in Austin, Texas.
Huawei is currently shipping 5G infrastructure solutions that span our infrastructure definition. China’s most successful telecommunications company claims to have shipped in excess of 100,000 5G base stations globally to date backed by 40 5G commercial contracts with nearly half in Europe. Carriers include China Telecom, China Mobile, and China Unicom, LG Uplus in South Korea, Three and O2 in the United Kingdom, KPN in the Netherlands, MTS the largest operator in Russia, and VIVA Bahrain, Saudi Telecom, and Etisalat in the Middle East.
From a spectrum support perspective, most of Huawei’s efforts around trial and deployment seem to be focused on the sub 6 bands. This may be due in large part to its home market operator focus on the mid-band spectrum for initial 5G deployments. Given Ericsson and Samsung are heavily betting on mmWave to support AT&T and Verizon in the US among other carriers, this could be a longer-term competitive disadvantage if Huawei has to play catch up. I also believe the company’s “loss leader” focus on offering low-cost hardware in lieu of more depth in software-defined tools and virtualized core as a potential disadvantage. From a differentiation perspective, Huawei is able to tap Chinese government subsidies to the tune of over $200 million based on its most recent annual report as well as a massive line of credit for its customers that some have estimated reaches a staggering $100 billion. The company is also developing custom AI silicon, and I learned earlier this year at their annual analyst summit they intend to embed it within every networking infrastructure solution. Those “smarts” could help deliver improved automation and remediation capabilities.
Nokia is currently shipping 5G infrastructure solutions that span our infrastructure definition and claim that they have landed over 40 5G contracts that include AT&T, Sprint, and T-Mobile in the U.S., all three South Korean operators, China Mobile, SoftBank and Docomo in Japan, and Vodafone Italy among a handful of others in Europe, Asia, and the Middle East. From a spectrum perspective, the company is supporting both sub 6 and mmWave with its AirScale base station solutions, but I don’t see a lot of innovation coming out of Finland despite the company’s storied beginnings dating back to the 1800s. In particular, it seems the company has been unwilling to aggressively embrace software-defined tools and AI to bring lower cost structure to operators as possibly a means to continue to milk its services business. A continuation of financial weakness in its core business is also discouraging pointing to an underwhelming fiscal 1Q reported back in April.
ZTE is currently shipping 5G infrastructure solutions that span our infrastructure definition, but one has to ask, why continue in the face of even more adversity than its Shenzhen cross-town rival Huawei? With a recent record loss of $1B in 2018, a massive $1.4B fine in the face of trade sanctions and a complete gutting of executive management, the company has been unusually quiet about its 5G aspirations. However, ZTE claims 25 5G contracts backed by 50,000 5G base stations shipped globally. Current deployments are mainly with the three largest Chinese operators but there are also a handful of wins with mostly smaller, regional operators in Europe and Asia. Like Huawei, most of ZTE’s focus is in the sub 6 spectrum range with announcements of trials around mmWave, technology demonstrations, “co-development” efforts, “innovation labs”, and testbeds with Chinese, Korean, and European operators. The embattled company is also trying to address cybersecurity concerns by copying Huawei’s lead in opening its own assurance centers in Europe and China. I believe ZTE could improve its position by taking an even more transparent approach in dispelling security risks. This could include inviting third party inspection of its manufacturing facilities and supply chain as well as considering western-based contract manufacturers.
Multi-purpose provider evaluation
Leader: Cisco Systems
Although Cisco is not in the business of supplying purpose-built cellular infrastructure, it does offer a packet core platform that bridges cellular, Wi-Fi and IoT connected services as well as integrates LTE today in a handful of devices for use cases such as temporary on-demand links, and redundancy. Examples of the latter can be found in some of its Cisco ISR and Meraki MX routers. However, with respect to 5G the company is embarking on a number of strategic initiatives thorough its service provider organization that are worthy to note. Two of the most recent ones include the OpenRoaming initiative and Cisco Unified Domain Center. Let’s examine each.
OpenNetworking was an initiative birthed by Cisco intended to enable a seamless experience as users pass between Wi-Fi 6 and 5G networks. It’s currently in beta test, but with the backing of Boingo, GlobalReach, and others, it has the potential to improve the connectivity experience by eliminating the need to log in and out of portals that are often agonizing tasks.
Cisco Unified Domain Center (UDC) is a software solution aimed at making it easier for operators to generate new revenue with 5G given the past challenges with LTE and a “dumb pipe” approach. The consumer benefits of 5G are obvious given the lower latency that will drive richer video experiences. However, it’s expected that 5G will be much more transformative from a business services standpoint. UDC will help extend enterprise services to mobile endpoints and implement it all through a highly secured, policy-based methodology that can span multiple mobile operators. The applications are diverse and include one of the most talked-about 5G uses cases - smart manufacturing. When I met with the team at Cisco Live North America, they shared that UDC is currently under evaluation by three major carriers with more to follow.
Leader: Hewlett Packard Enterprise/Aruba
Hewlett Packard Enterprise/ Aruba is taking a decidedly edge-centric approach in driving its overall 5G strategy. It’s no secret that CEO Antonio Neri has pledged an investment of $4B+ over the next 4 years to make the vision a reality and the Edgeline platform factors heavily here.
Beyond the network edge, from my perspective, HPE is driving one of broadest sets of telco-certified compute, storage, and networking portfolios aimed at core networking. The global services reach with Pointnext is compelling as well as the set of validated reference designs and NFV blueprints that have been published to date. Layer in a set of communications and media solutions that span industry-standard operations support systems (OSS) and business support systems (BSS) and the company is delivering an end-to-end set of offerings that span core to edge.
Aruba plays an important role as it leads the enterprise networking portfolio. There has been debate among carriers and networking providers as to the co-existence of 5G and Wi-Fi. Carriers might like to see Wi-Fi die a slow death, but the reality is that they are better together. Based on economics, indoor vs outdoor propagation, and use case/ application both will live on and Aruba is delivering compelling solutions based on the new Wi-Fi 6 standard that supports a greater density of devices, lower latency, and higher throughput for both campus and branch deployments.
Follower: Dell EMC
Dell EMC is leveraging its open standards-based DNA to deliver telco-grade compute and storage and operator collaboration at scale. I like the fact that the company is moving beyond a hardware focus to seek collaboration opportunities with carriers. At Dell Tech World this year, the company’s service provider team announced a partnership with Orange in Europe to develop and validate 5G use cases and business models with an emphasis on multi-cloud deployment to drive scale. The initiative will eventually expand to include 15 carriers that drive 80%+ of mobile broadband services globally.
Dell’s vision to bring a portfolio of companies together with Dell Technologies is another asset that I would like to see Dell EMC further leverage as it sets its eyes on 5G service opportunities. VMWare has a formidable set of capabilities including NFV assurance and SD-WAN with VeloCloud to enable new monetization opportunities. However, I believe Dell EMC could explore co-development opportunities with RSA to solve one of the biggest concerns being raised by governments and large enterprises alike, 5G security given the explosion of connected devices that are anticipated. The latter could quickly propel the company into a future leader status.
Future Player: Lenovo
Lenovo is not currently shipping 5G infrastructure solutions but has put a team in place to pursue a set of telecommunications offerings. I’ve had the opportunity over the last year to meet with leadership that boasts impressive credentials from the likes of Nokia and IBM. I’ve been consequently impressed with Lenovo’s overall telco strategy and ongoing pilot with one European operator. I believe the company can be competitive long term especially given its accomplishments in the server market.
Drum roll please - and the winners are…….
From my perspective, when you evaluate both the quantitative and qualitative attributes, the winner on the single-purpose infrastructure side presently is Ericsson and for multi-purpose infrastructure is Hewlett Packard Enterprise/Aruba. As single-purpose runner ups, Samsung is making great inroads and I expect to see them knock down more opportunities as 5G deployments progress. Huawei has great potential as well as it navigates through the ongoing US vs China trade war and considers some tactical course corrections. Or the multi-purpose runners-up Cisco Systems and Dell EMC, I expect to see continued innovation and leverage of each’s significant global market reach. Bear in mind this evaluation is based on the progress to date of each of these companies and could certainly change over time.
We may be at the apex of the 5G hype cycle but carriers around the world are spending billions of dollars in infrastructure from the likes of traditional providers Ericsson, Samsung, Huawei, Nokia, and ZTE as well as from what I’ve coined as multi-purpose players such as Cisco, Dell EMC, and HPE to cover a range of spectrum in the hopes of being first to monetize 5G use cases. We are probably several years away from the 5G “poster child” application of autonomous driving given the need for IoT telemetry in our roadways, but I expect to see significant 5G impact in areas such as manufacturing, retail, healthcare, education, and field service over the next 12-18+ months globally given the participation of all of the infrastructure providers evaluated in this article.
Disclosure: My firm, Moor Insights & Strategy, like all research and analyst firms, provides or has provided research, analysis, advising, and/or consulting to many high-tech companies in the industry, including Cisco Systems, Dell EMC, Ericsson, Hewlett Packard Enterprise/ Aruba, Huawei Technologies, Lenovo, Nokia, and Samsung cited or related to this article. I do not hold any equity positions with any companies cited in this column. <<
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- Eric L. -