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China's top OEMs to rise.


Tuesday, May 19, 2009

Revenues for wireless infrastructure systems fell off a cliff in the first quarter of 2009 despite record sales of base stations. Sales are expected to be generally flat over the next four years, forcing a consolidation in which China's top OEMs will rise

"Up until the last quarter 3G was ramping and 2G was holding up particularly in emerging markets," said Scott Siegler, senior analyst for mobile infrastructure with Dell'Oro. "In the first three months of 2009, 3G continued to grow but GSM and CDMA pretty much plummeted and 3G growth was not enough to offset 2G's steep decline," he added.

The number of wireless subscribers is growing, and a record of more than 100,000 wireless base stations shipped in the first three months of the year. But prices for gear are falling fast.

The price drops started in 2007 when cost-sensitive emerging markets often deploying older technologies started to become a major slice of the market. At about the same time China's two top OEMs--Huawei Technologies and ZTE Corp.--became significant players, offering systems at nearly half the price of the top vendors such as Alcatel-Lucent, Nokia Siemens Networks and Nortel.

In this environment, Siegler sees a shakeout for the ten vendors currently making wireless infrastructure gear. "In three years, there will be four or five vendors left in this market," he said.

Siegler predicts Huawei and ZTE will be among the survivors, in part because the companies are already reaping much of the growth from their home market in China.

Huawei became the third largest wireless gear vendor in the last quarter, knocking out Alcatel-Lucent. ZTE now ranks as the fifth largest vendor behind Motorola.

Huawei and ZTE "will be big, big vendors and a lot of it has to do with the 3G rollout in China," said Siegler. "Huawei and ZTE had the largest share of those contracts," he said.

China's three wireless carriers are expected to spend $60 billion over the next three years to update their wireless networks. After much delay, deployments of 3G technology started this year at China Unicom which aims to turn on 3G service in May.

Siegler characterized the Unicom deployment as "the fastest and largest 3G roll out in history."

Huawei got 30 percent and ZTE took 20 percent of the Unicom deal. Ericsson grabbed 26 percent of the sales.

Separately, China Telecom recently closed a large tender for wireless gear. Huawei and ZTE each got 25 percent of that deal. In addition, ZTE got the lion's share of deals for equipment supporting TD-SCDMA, a China-specific wireless technology.

By: DocMemory
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