Fierce Network Research Bulletin, Friday, May 10, 2024 — A director at the U.S. National Science Foundation has harsh words for the country’s telco companies: We’ve lost the 5G race.

But the Next-G game is just getting started, and U.S. companies can win by playing to American strengths, said Sudharman K. Jayaweera, a program director at the National Science Foundation.

Jayaweera spoke at the Linux Foundation Open Networking & Edge (ONE) Summit in San Jose, Calif., last week. (Jayaweera emphasized that he was stating his own opinion and not speaking officially for the NSF.)

In addition to telcos lagging, no U.S. vendor has significant market share in the 5G infrastructure equipment market, which is dominated by Huawei, ZTE and other companies, Jayaweera said.

How did the overseas firms lap the U.S.? With heavy investment in R&D leading to competitive products at lower cost and winning global 5G deals, Jayaweera said.

U.S. firms did a lot of good research, using funding from the NSF, Department of Defense, and other agencies, but R&D investment in the U..S did not translate from basic research to technology.

Likewise, the U.S. lags in true 5G networks. Most of the country’s deployments are non-standalone (NSA) 5G, which doesn’t support 5G’s most advanced features.

The U.S.’s 5G gap isn’t just a threat to telecom — it threatens to handicap emerging industries, which need advanced performance that can only be provided by standalone (SA) 5G networks, Jayaweera said.

These emerging verticals include connected autonomous vehicles and other intelligent transportation, smart factories, training and gaming applications using virtual-, extended- and mixed-reality, and robotic telesurgery, Jayaweera said, replying to a follow-up email query from Fierce Network.

Many of these emerging industries require low-latency performance with high reliability and low jitter, available primarily from 5G SA.

Open source RAN can help

Open source, open radio access networks (RAN) can play a role in the U.S. gaining ascendancy in Next-G networking.

“Open source can accelerate innovation and it can offer cost efficiencies,” Jayaweera said. “It can provide early competitive advantage and a chance for the U.S. to establish a skilled domestic workforce.”

He added, “That will only happen if we actually make a concerted effort to grow the skilled workforce here.”

For that, we need to get universities and research institutions more involved in open source, to build a local ecosystem that can support skilled workforce development in open source, open RAN and wireless technology.

Multivendor open RAN faces an obstacle in adoption, in that no single company takes responsibility for making sure multivendor implementations work. That’s a great opportunity for systems integrators, Jayaweera said.

But open RAN alone isn’t going to make the U.S. ascendant in 5G, or Next-G.

Samsung, Mavenir, NEC, Fujitsu, Rakuten Symphony and Parallel Wireless hold about 97% of open RAN market share, Jayaweera said.

Of these, only Mavenir and Parallel Wireless are U.S.-based. These market leaders will face competition from incumbent vendors such as Ericsson and Nokia. Already, Ericsson has inked a deal to deploy its Open RAN in AT&T networks.

By 2028, the open RAN market share of the RAN market will be about 20-30%, with at most 10% of that market share being multi-vendor, Jayaweera said.

Assuming 25% of the RAN market is open RAN by 2028, if even half is claimed by the current incumbents, that means only a single-digit percentage of the overall RAN market will actually be open. “In my view, that is not going to be a game-changer,” Jayaweera said.

A singular focus on open RAN may hinder efforts to catch up to the competition in 5G and break the incumbents’ market dominance, Jayaweera said.

What will Next-G look like?

“The most interesting and defining feature of Next-G networks may be that they are open and integrated in many ways,” Jayaweera said in email. They’ll be open and integrated across domains, connecting space-based, air, ground and undersea networks, and connecting networks of sensors, compute and communications.

These networks will operate over multiple available bands, requiring highly spectrum-agile radios. They will use open standards, not just in open RAN but also in other interface segments. Next-G will be cloud-native and AI-native.

All of this can work to the U.S.’s benefit, because it allows us to play to our strengths, Jayaweera said.

The U.S. leads in open source and cloud technology, particularly bringing the cloud to the edge — both multi-access edge computing (MEC — formerly known as the mobile edge) and space — along with artificial intelligence (AI) and machine learning. The U.S. also leads in software and IT, and in power and in spaceflight. All these domains will be integral to Next-G networking.

While the U.S. excels at skilled workforce development, the country needs to set a goal to graduate and train the workforce at numbers we need and in areas we need, Jayaweera said.

Additionally, developing extremely low-power, energy-efficient, software-defined radio to power Next-G networks will be a grand challenge for the U.S., Jayaweera said.

Dire or just early days?

Do Jayaweera’s insights of a dire U.S. present for 5G, and bright opportunities for Next-G, hold water? Mostly yes.

Industry analysts agree that non-U.S. vendors dominate the 5G equipment and software market. Analysts at Mordor Intelligence described the market as dominated by five major players, of which only one is American: ZTE, Nokia, Cisco Systems, Huawei and Samsung.

Dell’Oro Group ranks Huawei as number one for 5G RAN in market share by revenue, with more than 30%, followed by Ericsson in the number two slot, at 20-30%, followed by Nokia (less than 20%) and ZTE (more than 10%). None of these are U.S. companies, of course.

In a report, Gartner cites Mavenir and Microsoft — two U.S.-based companies — as “emerging software-based vendors” that are “gaining traction with cloud-native solutions, delivering distinctive value additions. They harness their strengths and achievements in adjacent markets and integrate open-source components to offer a more agile solution.”

Gartner’s commentary complements Jayaweera’s recommendation — that U.S. companies can succeed by leveraging U.S. strengths.

Those strengths are not guaranteed to last forever; for example, China is outspending the U.S. on AI research, according to a report from Georgetown University’s Center for Security and Emerging Technology.

Dell’Oro analyst Stefan Pongratz takes issue with Jayaweera’s gloomy assessment of the state of the U.S. in the 5G market (while he cautions that he did not watch Jayaweera’s presentation). It’s still early days of 5G deployment, he said in an email to Fierce.

“My personal opinion is that the U.S. is in solid shape in this initial 5G phase, which is really a 4G+ and FWA [fixed wireless access] phase,” he said.

“When it comes to connecting the machines and proliferating 5G into the enterprises and across industries, I am not sure there are any major winners at this point. It is just very early days in the journey, and we will have a better read in the next 5 to 15 years about the potential efficiency improvements and value creation with cellular connectivity.”

Still, the U.S. is behind in 5G SA deployments, according to Dell’Oro analyst Dave Bolan. The analyst firm tracked 50 5G SA enhanced mobile broadband (eMBB) deployments through last year, of which only two — DISH Wireless and T-Mobile — were in the U.S.

The firm tracked eMBB because those networks are available to anyone, as opposed to private networks, of which the Global mobile Suppliers Association (GSA)  tracks 66, mostly still in the trial phase, Bolan said.

We’ll likely see progress in 5G SA deployments in both the U.S. and Europe next year, peaking in 2027, “just like prior mobile generations,” said David Lessin, director of ISG ProBenchmark.

While the U.S. has fallen behind in the 5G race, the emerging landscape of Next-G offers a new frontier for leadership in global telecommunications. By harnessing its core strengths in open source, cloud computing, AI, and skilled workforce development, the U.S. is well-positioned to lead the charge in the development of Next-G networks.

Interfaces designed to support interoperability between vendors are doing little to help telcos build multivendor networks.

Open RAN started out as a noble attempt to pair radio units (RUs) from one vendor with compute products from another. Since then, it has spawned enough letter-and-number combinations to resemble one of the Enigma key sheets issued to Alan Turing’s code crackers. These A1, E1, E2, F1, O1, O2, X2, etc., etc. interfaces cover just about every imaginable bit of joinery holding together the parts of a radio access network. But the effort increasingly seems to outweigh the benefits.

Take that open fronthaul 7.2x interface between RUs and the distributed units (DUs) hosting RAN software. It is replacing an older interface called CPRI, maligned because it meant any telco had to buy these components in a pre-integrated package from one vendor’s system. But 7.2x doesn’t eliminate the expense and hassle of systems integration. Parts cannot simply be slotted together like Lego blocks.

What’s more, concern about the suitability of the original interface for massive MIMO – an antenna-rich 5G technology – has now birthed several mutations: 7.2x category A, for basic radios; 7.2x category B, for massive MIMO; 7.2x class A (one option to address the perceived shortcomings of category B); 7.2x class B (another option aimed at the same problem). If casual readers are confused, industry people in the know sound unhappy.

“We worry a great deal about fragmentation of the ecosystem,” said Alok Shah, the head of strategy business development and marketing for the networks business of Samsung Electronics America, when he met Light Reading a few weeks ago at Mobile World Congress (MWC). That class A option involves putting more intelligence into radios and only so many vendors have the means to do it, he said. (Ericsson is regarded as the main sponsor of this approach.)

Massive MIMO mumbo jumbo

Ericsson gave its perspective on the open RAN dilemma in a recently published handbook on massive MIMO. “Open interfaces does not equal multivendor,” it said. Besides ruminating on the costliness of systems integration, and the time it takes, the Swedish company pointed out that vendors collaborating on massive MIMO would need to coordinate software releases, including all necessary testing and verification, to guarantee interoperability.

In addition, the features developed would be dictated by a “minimum common denominator” in a tie-up of this nature, resulting in “performance limitations,” according to Ericsson. An operator would also face the problem of identifying which vendor is responsible for any faults that arise (and therefore any fixes that need to be made).

Nokia is seemingly in agreement about the technical challenge. Complex algorithms split between DUs and RUs would have to match, forcing one or both vendors to make software changes, said Tommi Uitto, the head of Nokia’s mobile networks business group, at MWC. Any vendor adapting algorithms like this could end up with multiple software tracks.

Today, massive MIMO is strictly single vendor. At least, there is no evidence of a significant “multivendor” deployment based on open RAN specs. What seems remote is the possibility of such partnerships between the dominant RAN vendors. Ericsson and Nokia seem as predisposed to coordinate their software releases as Donald Trump is to share details of his election campaign with Joe Biden’s team. Nor is it obvious why operators or regulators would welcome such coordination by companies that collectively account for most of the RAN market outside China.

The problem of scale

Is this a problem? If open RAN’s only achievement was to facilitate a coupling between Ericsson and Nokia (or other Tier 1 vendors), it would fail to realize its main objective of spurring competition and diversity in the market. Tie-ups have, conversely, tended to involve either a big player and a smaller one or two smaller companies. But some of these arrangements are starting to look as formal as joint ventures, the fruit of long sessions to produce a blueprint or template that can be taken around the world. They are as “pre-integrated” as anything out of Ericsson or Nokia.

Small companies have also failed to land big deals outside a few ailing greenfield projects, and the RAN market has been shrinking. Total sales dropped 11% last year and they are expected to fall by 4% to 6% in 2024, according to market-research firm (and Light Reading sister company) Omdia. Even if the market recovers next year, nobody expects anything but modest growth in the foreseeable future. Is the sector once again ripe for consolidation?

“It is a scale business,” said Fredrik Jejdling, the head of Ericsson’s mobile networks business group, when recently asked that question. “It takes a relatively large R&D investment, and it takes an investment in manufacturing and in supply-chain management to be able to deliver this critical network that 5G provides for us.”

Consolidation is clearly desirable in Europe’s fragmented service provider market, according to Ericsson, and Jejdling draws a parallel between that and his own sector. “We have a handful of players left,” he said. “Fifteen or 20 years back there used to be multiple players in our segment as well. It is the same with semiconductors and the same with the cloud, and if you artificially try to keep up the number of players, each one is going to be subscale and then no one is going to be able to reinvest in the networks that are critical for the future of 5G.”

Nowhere in his remarks does Jejdling call for another round of mergers involving new RAN product suppliers. But his comments do beg questions about the durability of “subscale” RAN vendors. An estimate from an AT&T technology executive last year put Ericsson and Nokia’s combined annual R&D spending in this area at about $5 billion (together they spent $9.3 billion on total R&D last year). To look competitive, then, a company would have to be investing about $2.5 billion a year.

This looks impossible for all but a handful of players that belong to large Asian conglomerates – namely Samsung, NEC and Fujitsu. Of course, part of the rationale for open RAN was that a company with a much smaller budget could be competitive if it specialized. But the specialists seem to be dying out. Mavenir and Parallel Wireless, for instance, started out as software developers but subsequently expanded into hardware design.

Radio gaga

Diversity, nevertheless, looks more feasible and perhaps more desirable on the radio hardware side. NEC and Fujitsu are both recognized for their RUs but have struggled to interest telcos in their software for DUs or central units (CUs), where other RAN functions are handled. Mavenir has been able to land RU deals since entering this part of the market. Genuine specialists such as Taiwan’s MTI remain in contention.

There may be a few reasons. To start, RUs attract more than 50% of the “wallet share,” according to Yago Tenorio, the network architecture director of Vodafone Group. That would explain why telcos want optionality and means there might be room for a bigger number of players in this subsector.

Second, the supplier of DU/CU software often takes the lead in systems integration, according to Nokia’s Uitto, and systems integration demands considerable resources, making it harder to compete for this business. Third, and perhaps influenced by these factors, open RAN operators tend to be combining one DU/CU software vendor with multiple RU suppliers and not the other way round.

No doubt, this model has been aided by open RAN specs that shift intelligence into DUs and keep RUs as basic as possible. Provided the DU/CU software vendor is good enough, operators can buy RUs from multiple suppliers to address various niche requirements. But as a growing 5G usage drives telcos toward massive MIMO products, there is a danger of complexity. If big operators ultimately prefer the class A split, smaller vendors could lose out.

Orchestration maneuvers in the dark

Meanwhile, many of those other Enigma-like interfaces do not look very open. Of particular concern is a layer called service and management orchestration (SMO) and the joinery that surrounds it. SMO is deemed a big differentiator by open RAN enthusiasts. It is supposedly the automated conductor to the many instruments of the RAN and comes with features like the RAN intelligent controller (RIC), a kind of app store for the network.

As recently as late 2023, however, Vodafone and NTT Docomo were warning about half-baked interfaces between SMO and other parts of the RAN. Without progress, “vendor proprietary extensions will be required to interconnect vendor functions with SMO, excluding SMO from the positive evolution,” they said in a detailed white paper.

Ideally, an operator should be able to use one vendor’s SMO in unison with another supplier’s network functions. Ericsson says this is possible with its own SMO, branded the Intelligent Automation Platform (IAP). But there is still no evidence it has been done. And the $14 billion contract it announced with AT&T last December, Ericsson’s largest “open RAN” deal so far, covers both SMO and DU/CU software.

When a vendor provides both, it has an opportunity to create “sticky functionality” between them, says Nokia’s Uitto. If he is right, then switching from Ericsson to another supplier in future could be even harder. Moreover, AT&T’s contract also has Ericsson down to provide its cloud-native infrastructure solution (CNIS) as the cloud platform for the RAN. The O2 interface between SMO and this layer was described as “partially vendor proprietary” in the white paper from Vodafone and NTT Docomo.

AT&T’s use of IAP might also rule out the deployment of certain RIC apps. Until now, these have come in two flavors: rApps, for non-real-time functionality; and xApps, for the near-real-time sort. But IAP is good only for rApps. That is possibly because Ericsson sees third-party xApps as a threat to its mainstream business, said James Crawshaw, a principal analyst with Omdia, when IAP was launched back in late 2021.

One of the most prominent xApp developers is a company called Cohere Technologies. Ray Dolan, its CEO, made his name at Flarion Technologies before selling the highly regarded radiotechnology player to Qualcomm for $600 million in 2006. At Cohere, Dolan has pioneered a “beamforming” system that promises to boost the capacity of deployed radios. Operators including Vodafone have been impressed after field trials. But supercharging basic radios could endanger sales of the massive MIMO radios Ericsson now spends billions to develop. Today, you won’t find Cohere anywhere near IAP.

A new category is now emerging, said Alex Choi, a senior Deutsche Telekom technology executive who currently chairs the O-RAN Alliance, the industry body responsible for specs. The dApp, or distributed app, would run directly on CUs and DUs, he said in a LinkedIn post, and satisfy needs that rApps and xApps cannot. “They handle real-time control loops below 10 milliseconds, focusing on radio management, resource scheduling, beamforming, and modulation functionalities,” Choi said. Get ready for more interface mayhem.

US car maker Tesla has just released a 78 second video about a private 5G network at its Berlin autoplant, and the whole of social media has exploded; or at least, the tech commentariat on certain channels has shared and remarked as if it is a eureka moment. Which is kind of annoying, honestly, because Tesla says nothing in it that has not already been said (in these pages, plus certain others) about private 5G in Industry 4.0. 

But then, this is Tesla, of course; and, like a few other grossly-capitalised tech-trendies, when it talks, the world listens – and the market likely follows. So perhaps its video short, voiced by Pat and Ernesto in its Berlin IT department, is just what the private 5G market needs right now as it grapples with some kind of maturity. But what does it actually reveal? What do Pat and Ernesto (their surnames are not given) say? 

The video is embedded below, along with a full transcript of it – because, you know, everything Tesla says matters (insert eye-roll emoji). But here is what we actually do know from it. The rest – the identity of vendor partners and integrator partners; the rate of use-case stacking and multi-site scaling; the in-car private-5G stuff – will wait for another day. A point as well that Tesla’s private 5G interests have been talked about for ages like an open secret, so there is plenty of other (good) commentary out there. 

But here goes – for the sake of clicks, and all that. 

1 | ‘First’-est and fastest 

This is the biggest takeaway. Pat, part of the IT team at Tesla’s manufacturing plant in Berlin (Gigafactory Berlin-Brandenburg), says the company is ready to replicate its private 5G setup in the German capital across its production facilities worldwide. He implies the factory in Berlin – billed as its “most advanced, sustainable, and efficient facility yet” on its website – was the “one of the first ones” to deploy private 5G. Whether that is a first among Tesla plants, too, or a first among global or regional automotive manufacturing plants, is not quite clear. 

But given Germany was quick to issue ‘vertical spectrum’ for enterprises to deploy private 5G at 3.7-3.8 GHz, which the Tesla factory presumably uses, and its industrial sector in general, and its automotive sector in particular, has been slow to turn test networks into live production networks, then Tesla’s claim of primacy looks sound. Pat comments: “We are one of the first ones in the manufacturing automotive industry to launch private 5G into manufacturing at big-scale. And here at Giga Berlin, we’re actually the first ones to do this, and then [to] scale it globally.”

2 | Coverage is the killer

It is obvious perhaps; why else would it make the video? But Ernesto, part of the networking team, says private 5G has “really changed the way we deliver network (connectivity) in many places in the factory”. That point (“really changed”) should not go without comment. Ernesto compares the cost in time and effort to lay cable and electricity to connect its outdoor areas, in particular, with shorter-range higher-volume Wi-Fi access points. “Now, it’s really (just) that small antenna over there on top of [a] cell building (tower),” he says, gesturing at a lampost in a parking lot, perhaps, beneath a grey Berlin sky. 

Coverage, of course, is the killer application for private 5G (and LTE/4G) at the moment – more than fancy high-fidelity indoor production-line use cases, which will come later. It is the same story that everyone tells: cellular reaches the parts that other enterprise networking technologies cannot, to paraphrase an old beer commercial. Tesla is finding the same. It’s not revelatory, just because it is well understood; but it sounds like Ernesto and co at Tesla have found the impact on outdoor operations at least to be quite revelatory (“really changed”). 

3 | Robots everywhere

The background video footage shows a modern factory, and one we imagine is state-of-the-art so far as digital automation technology goes. Cars are carried on overhead conveyors; a time-lapse sequence shows parts being fitted to them from underneath. There are indoor trucks and trolleys and forklifts, and the outdoor segment shows a parking lot with a fleet of new cars, completed and ready to go. But the use cases being loaded onto the private 5G network in Berlin seem more practical than theatrical – as they should, and as they are in most private 5G setups.

Pat talks about enabling “mobile machines to communicate ultra reliably and [to] just keep running all the time”. For “mobile machines”, read AMRs and AGVs and MIRs, and all of the other automated rolling logistics stock that carries goods about factories and warehouses, and struggles historically with handover between Wi-Fi access points. Again, Tesla is using private 5G like everyone else. There is nothing new, except Tesla’s own ringing endorsement. Ernesto’s outdoor sequence references the ability to flash software updates onto vehicles easily, and presumably just to locate them in the lot. 

Again, other car makers are doing the same. But what it shows is the use case(s) looks clear and the business case looks solid.

4 | Total revolution

But, it should be said again, that any serious endorsement from a modern tech-first manufacturing phenomenon is powerful for the whole Industry 4.0 sector, and that the video lightly hints that Tesla sees private 5G as a foundational platform for more ambitious Industry 4.0 pursuits. Pat says: “Private 5G lays the foundation for innovation and next-level operations at our manufacturing and warehouse facilities.” Ernesto follows: “This is how 5G is helping us transition even faster to a sustainable future.” 

The message is that private 5G will bust down the doors for industrial AI, and total revolution.

The reality today is, said Chris Keone, director of Division X at BT Business, enterprises are not actually phoning up operators and saying, hey, I’d like to buy a private network from you. “They say, here’s a problem I’m facing, help me solve it. And we’ll help them navigate through and figure out the right way to do that using the right network expertise,” he said.

Keone was speaking during this week’s Private Wireless Network Summit hosted by Fierce Network, when he and some of his peers discussed opportunities and current trends in the private wireless sphere.

Broadly, the message from the operator participants was positive, and they cited growing demand in sectors such as automotive, manufacturing, healthcare, ports, logistics and sports and entertainment venues.

Indeed, Terje Jensen, SVP, global business security officer and head of network and cloud technology strategy at Telenor, said many industries are now moving forward on private networks, while Jennifer Artley, SVP, 5G Acceleration at Verizon Business, said the operator’s “funnel is exploding” and “our business is really converting these opportunities into real, live dynamic, transformative differentiated networks for our customers.”

However, as Keone observed, amid the burgeoning interest in private networks, there is also often a case for network slicing to help solve less complex requirements.

“Slicing is definitely something that is playing a big part, especially as we are moving to switch on our 5G standalone network at some point later this year. What role does that play now in our private network strategy is a very interesting one to start co-creating with our customers,” he said.

For example, slicing on the public network could be what is required to solve a particular pain point. “It’s certainly going to be something that we will aim to properly prove the value, test and explore later this year,” Keone said.

Jensen said Telenor follows a similar approach to BT by starting with the customer need, discovering how to solve the initial use cases, and then driving more value from those.

“We can deploy private networks in two ways,” he said. Either on dedicated on-premises equipment, “which could be potentially be fully autonomous. And the second is that it’s part of our public network. And you can do slicing in both of these deployments … whether you need to do slicing from the first use case depends on the needs.”

5G moves to the fore

Keone also said BT is “definitely seeing more of a trend and demand for 5G now versus 4G” for private wireless networks, in large part owing to the growing awareness of 5G capabilities such as high bandwidth and ultra-low latency. 

This view certainly tallies with a new report from analyst firm SNS Telecom & IT, titled “Private 5G Networks: 2024 – 2030,” which suggests the real-world impact of private 5G networks “is becoming ever more visible, with diverse practical and tangible benefits.”

“Compared to LTE technology, private 5G networks can address far more demanding performance requirements in terms of throughput, latency, reliability, availability and connection density,” the report said. “In particular, 5G’s URLLC and mMTC capabilities, along with a future-proof transition path to 6G networks in the 2030s, have positioned it as a viable alternative to physically wired connections for industrial-grade communications between machines, robots and control systems.”

The report predicts that annual investments in private 5G networks for vertical industries will grow at a CAGR of about 42% between 2024 and 2027, eventually accounting for nearly $3.5 billion by the end of 2027.

Network revenues at Samsung plunged for the recent first quarter, according to a company report, and the immediate outlook is bleak.

It will have been missed by most Samsung watchers, like a soiled feather in a peacock’s otherwise impeccable plumage, but the South Korean vendor’s networks business posted a miserable result for the first quarter of 2024. As Samsung this week reported a surge in profit and headline sales growth, sharp-eyed observers of 5G wildlife will have spotted a fall in network revenues. It’s a big one, too – in percentage terms lying somewhere between the drops seen at the comparable units of Ericsson and Nokia.

This can only be deduced by subtracting Samsung’s gadget (what it calls MX) revenues from the gadget-and-networks total. During the first quarter of 2023, that basic calculation left revenues of 1.08 trillion South Korean won (US$780 million) on the networks side. A year later, they come to just KRW740 billion ($530 million). This year-over-year decline of 31% compares with constant-currency falls of 19% at Ericsson’s main networks unit and 37% at Nokia’s mobile networks business group.

Few will be shocked. The 5G subsector in which Samsung mainly plays is currently the victim of a “capex squeeze” by telcos following earlier rounds of investment. Operators in the US appeared to overindulge in 5G products in the aftermath of the pandemic. According to Ericsson and Nokia, they still have stock to deplete before they need to make another trip to the Ikea of 5G. That now seems likely to happen later this year (so the Nordic kit vendors say), but market research firm Dell’Oro expects global sales of radio access network (RAN) products to shrink 4% this year. Börje Ekholm, Ericsson’s CEO, reckons that’s “optimistic.”

Still, some might have anticipated gains by Samsung this year in its challenger role. It seems to pop up everywhere as the main alternative to Ericsson and Nokia, especially where governments have banned Huawei and ZTE, the increasingly out-of-favor Chinese rivals. In the UK, Vodafone insists the substitution of Samsung for Huawei – with 2,500 sites due to be swapped by the end of 2027 – has moved significantly beyond the initial trial deployment of just 20 sites. Samsung is also occasionally visible in the network activities of several other European telcos, including different parts of Vodafone Group.

No Indian summer

Unfortunately, it has probably suffered a painful landing after especially vertiginous drops in the US and India, possibly Samsung’s two biggest markets outside South Korea. Back in 2020, it reportedly scooped a $6.6 billion 5G contract with Verizon at Nokia’s expense, but the US telco has recently taken a very large scythe to its capital expenditure budget. Its overall spending fell from $23.1 billion in 2022 to $18.8 billion in 2023, and from $6 billion in the first quarter of 2023 to $4.4 billion a year later.

India, meanwhile, seems to have treated its 5G rollout like an urgent mission. Europe’s vendors benefited from the explosion of activity last year, with Ericsson calling it an “unprecedented rollout pace” and booking sales growth of 185%, to 31.2 billion Swedish kronor ($2.9 billion). But the telco foot inevitably slid off the gas in late 2023. By the time it published results for the first quarter of 2024, Ericsson was grumbling about “a reduction in capex investments in India.” Sales categorized under “South East Asia, Oceania and India” consequently fell 42%, compared with the year-earlier quarter.

While Samsung breaks none of this out, it does appear to have lost RAN market share in India with the transition to 5G. In the 4G era, it had been the sole supplier to Reliance Jio, now India’s biggest telco. And just as Europe’s operators seem eager to seat Samsung next to their traditional kit vendors, so Jio wanted 5G roles for Ericsson and Nokia. A single-vendor arrangement obviously made sense for Jio when it was trying to build 4G quickly as a new entrant. As an established player deploying 5G, it has opted for a multivendor approach, splitting work between the three RAN suppliers.

The recent first-quarter sales drop of 31% looks bad compared with the 6% year-over-year decline for the same period of 2023. That said, Samsung’s full-year sales in 2023 were just KRW3.78 trillion ($2.7 billion), 42% less than it made in 2022. And analysts expect some bottoming out to occur this year. Omdia, a Light Reading sister company, currently predicts RAN sales will shrink between 4% and 6% in 2024 after falling 11% in 2023.

Avenues for growth

Even so, Samsung has relatively few avenues for growth. It is effectively locked out of a Chinese market that awards nearly all contracts these days to Huawei and ZTE. India, the other country home to more than a billion people, is catching its breath after recent 5G exertions. Numerous countries in Africa and Latin America are still on cozy terms with the Chinese and not about to “rip and replace” their Huawei and ZTE networks.

As for North America, AT&T has just awarded a huge $14 billion contract to Ericsson that involves replacing Nokia equipment. This would seem to rule out any opportunity for Samsung except as a provider of radio units (RUs) linked to Ericson’s RAN software. But open RAN collaboration of this nature seems improbable between the biggest vendors, whose RAN secrets are likely to be as fiercely guarded from rivals as Coca-Cola’s famous recipe.

Ericsson and Samsung, moreover, are at odds on open RAN for massive MIMO, an advanced 5G technology. Samsung is willing to accept RUs without certain features provided these are included in the distributed units (DUs) that host RAN software. Ericsson is not.

Samsung could always make inroads with T-Mobile US, the other big US telco. But this would have to come at the expense of Ericsson or Nokia, already weakened and laying off staff. It has recently picked up some business with Telus in Canada, too. Outside this market, though, its best bet probably lies in Europe. Despite having two large homegrown vendors on their doorstep, operators in the region that have lost or risk losing access to Huawei seem determined to have a third option.

What’s more, there has been much talk by Vodafone of a major tender, covering 170,000 sites in Europe and Africa, for RAN equipment. It kicked off the process this year and has already dropped numerous hints that Samsung is the frontrunner. The same template used for the Huawei swapout in the UK has now been carried into parts of Romania. Andrea Dona, Vodafone UK’s chief network officer, calls it a “blueprint.”

It is now a tried and trusted combo of vendors, with Samsung providing most RAN parts and software, Dell and Intel supplying servers and chips and Wind River responsible for the containers-as-a-service (CaaS) platform. Vodafone UK also claims to have recently combined a massive MIMO RU from Japan’s NEC with Samsung’s DU. What’s unclear is how much flexibility there is to replace one of these players, whose arrangement seems to be solidifying like cement.

It’s equally doubtful there really is a 170,000-site opportunity for Samsung in the imminent future. For starters, Vodafone has exited various sizeable markets since these tender ambitions were first disclosed in 2019, including Italy and Spain. It may be under some pressure to evict Huawei: The Chinese vendor accounted for as much as 60% of its European footprint before the launch of 5G, according to research by Strand Consult, and only Romania and the UK seem to have started swaps. But there would be no sensible commercial reason to jettison newish 5G equipment from Ericsson and Nokia. Amid a capex squeeze, and Vodafone’s own financial difficulties, a 5G splurge would be counterintuitive.

One source who spoke with Light Reading confidentially regards the tender as the start of an extended process akin to painting the Golden Gate Bridge. In that sense, the last touches of paint have been applied to the end of the bridge and the crew is about to cross over and start the long job again.

Hey, big spender

Nevertheless, Samsung has a few things most other RAN challengers lack. The first is a comprehensive product portfolio, including RUs, software for DUs and CUs (central units, hosting other RAN functions), a service management and orchestration (SMO) platform and a RAN intelligent controller (RIC). It is also now positioning itself as a systems integrator, much as Ericsson and Nokia would do. That’s critical because the one thing Samsung lacks – and has no intention of building – is that CaaS layer. Although Wind River shows up in most if not all its deals, Samsung says it is able and willing to partner with any CaaS provider.

Its products measure up well against those of more established vendors, according to telcos, and that is probably because Samsung can rely on the research-and-development (R&D) muscle of the bigger organization. Last year, Samsung spent KRW28.34 trillion ($20.6 billion) on R&D, 14% more than it invested in 2022.

During an industry event (FYUZ) in late 2023, AT&T technical executive Robert Soni estimated that Ericsson and Nokia spend a combined $5 billion annually on R&D in this area (their overall R&D spending came to about $9.3 billion last year). To match up, then, any rival would probably need to spend about $2.5 billion.

It’s evidently doable for Samsung. But spending of that magnitude would account for nearly all its network revenues last year of $2.7 billion. Add in other expenses and the net result would be a significant loss. While this is purely speculative, it illustrates why survival in the 5G RAN market is such a challenge for most vendors. If anyone can prevail, it is probably Samsung.