Global techno-politics may play a significant role in what slice of the emerging 5G cellular business stalwarts Nokia and Ericsson take.

China’s Huawei has become the big dog, with a 28% share of global telecom equipment revenue in third quarter of 2018, nearly as large as second and third place vendors Nokia and Ericsson combined, according to market watcher Dell’Oro Group. But the rising star faces pressures from Western governments concerned its systems have embedded cybersecurity backdoors for Beijing.

So far Australia, New Zealand and the U.S. have said they do not want Huawei systems used in their nations’ 5G networks. Japan, France and Germany are said to be mulling similar moves.

Tensions came to a boil in December when the Canadian government detained at the request of the U.S. Meng Wanzhou, CFO of Huawei and daughter of its founder. The U.S. wants to extradite Meng to face charges including bank fraud regarding sales of banned gear to Iran.

Huawei made its case that it remains a leading 5G infrastructure player at a recent press event at its Guangzhou Province headquarters, covered by Reuters. It said it has more than 25 contracts to supply 5G systems, has shipped more than 10,000 5G base stations to date and overall corporate revenues should exceed $100 billion this year, up 8.7% from 2018.

If true, that growth presages a bigger setback than expected for rivals Nokia and Ericsson. Dell’Oro estimates annual telecom equipment purchases were down two percent last year. Since 2015, Huawei’s market share has risen four points, shaving one and three points off Ericsson’s and Nokia’s shares, respectively, it added.

The market was roiled last year when the U.S. banned sales of semiconductors to China’s ZTE, accusing the company of violating sanctions against sales to Iraq. The ban effectively shut ZTE down for weeks until it was lifted in a deal the U.S. Commerce Department struck with ZTE, which claims about a 10% share of the market for carrier gear.

“ZTE fell deeply in 1H18. Ericsson picked up most of slack in Europe, but ZTE came back strongly in 3Q18,” said Stéphane Téral, executive director of mobile infrastructure research for IHS Markit.

It’s anyone’s guess how the politics will play out over the next several years when carriers are expected to slowly build out their 5G networks. What’s clear is amid a larger U.S./China trade war, politics could be one of the biggest factors in who lands 5G deals.

Growth in mobile data today is not at the fevered pitch carriers experienced in the transition to 4G LTE. In fact, many carriers see 5G as a vehicle for exploring new use cases for cellular in a wide range of businesses from retail shops to factory floors.

Thus, Dell’Oro forecasts the overall market for cellular-radio infrastructure gear will grow just 2% over the next five years as carriers to keep a tight watch on capital expenses. When it comes to 5G, carriers will tend to rely on their existing suppliers, especially since the initial non-standalone version of 5G relies on their LTE networks.

The U.S. and China will be the biggest markets for 5G, Dell’Oro said. For Nokia and Ericsson, that means the winds from Washington and Beijing may be one of the biggest factors in what happens with the juggernaut Huawei that has become their biggest rival.

By: DocMemory
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