RAN market downturn steeper than expected: Dell’Oro

The dire picture for equipment suppliers played out again today as Dell’Oro Group said the Radio Access Network (RAN) market in Q2 declined at its fastest pace in nearly seven years.  

While the decline was not unexpected, the magnitude of the reversal was much steeper than anticipated, according to the market research firm.

Of course, in North America, a decline was expected after the frenzied pace of 5G buildouts related to spectrum becoming available, but the drop-off came faster than many expected. Both Ericsson and Nokia cited weaker demand in North America and higher demand in India during their Q2 earnings reports.

Dell’Oro Group Vice President Stefan Pongratz in a statement attributed the Q2 downturn to “the clouds forming in North America.” In addition, the decline was amplified by extra inventory accumulated over the past couple of years to mitigate supply chain risks.

After the intense ramp-up from 2017 through 2021, RAN revenues stabilized in 2022 and the first quarter of 2023. Market conditions worsened in the second quarter, resulting in RAN declining at the fastest pace in nearly seven years, Dell’Oro said.

“It is tempting to point the finger at data traffic patterns, 5G monetization challenges and the odds stacked against an economy struggling with persistent levels of elevated inflation,” Pongratz stated. “Although these are, of course, important factors, we attribute the poor performance in the quarter to the clouds forming in North America. Alongside challenging 5G comparisons, the decline was amplified by the extra inventory accumulated over the past couple of years to mitigate supply chain risks.”

The top five RAN suppliers for the first half of 2023 include Huawei, Ericsson, Nokia, ZTE and Samsung. Nokia recorded the largest RAN revenue share gains between 2022 and the first half of 2023. Ericsson and Samsung’s RAN revenue shares declined between 2022 and the first half of 2023, the research firm said. 

While Huawei has been banned from the U.S. market, its second quarter 2023 RAN revenue share outside of North America was as large as Ericsson and Nokia combined, according to Dell’Oro.

Earlier this year, a report from Mobile Experts forecast that 5G RAN investments would decline over the next few years before 6G forces another ramp up. The pattern has repeated many times in prior wireless technology generations, with the second half of every “G” involving significant reductions in base station pricing, as well as shifts in volume.

High inflation and increasing interest rates also are affecting carriers' spending plans. For example, Dish Network, which the U.S. government set up to become the nation's fourth facilities-based mobile carrier, is taking a pause in its 5G network buildout after having met its June 2023 coverage mandates.