Amid a larger macrocell infrastructure market that’s “stuck in a funk,” Ericsson in the third quarter of 2016 was “dethroned” as king of the macro 2G/3G/LTE radio by Huawei, according to research firm IHS Markit.
For macro 2G/3G/LTE radio, Huawei took the lead from Ericsson, which is now No. 2, followed closely by Nokia, according to IHS senior research director Stéphane Téral, who says it’s worth noting that Nokia remained in the LTE market driver’s seat with 34 percent share, ahead of Huawei.
It’s all further proof that the shift from hardware to software in the mobile infrastructure market is well underway, Téral said in a research note. “All indicators point to 2016 being the first year of decline of 2G/3G/4G macrocell deployments,” he said.
Besides falling 11 percent to $10 billion compared to the third quarter of 2015, the macrocell market also declined on a sequential basis, falling 4 percent from the second quarter of 2016, despite some activity in China, Japan and North America.
LTE was somewhat of a bright spot in the third quarter of 2016, the analyst said, noting the segment was down 3 percent year-over-year but up 1 percent quarter-over-quarter driven by evolved universal terrestrial radio access network (E-UTRAN), which rose 3 percent. “China was once again fairly strong for LTE, but nowhere near last year’s heights,” Téral said.
Ericsson’s third-quarter results consisted of a 19 percent decline in its Networks segment, and the company has described its situation as being in the middle of a “significant company transformation,” although rival Nokia has called it more of a “crisis” mode.
During a capital markets day briefing in Barcelona, Spain, last month, Nokia CEO Rajeev Suri said Nokia is positioned to grow faster than the market. “Let me be clear. Nokia is not Ericsson,” Suri said, according to Mobile World Live. “They are in crisis. We outperform them in pretty much every area. Look no further than the third quarter to see the stark differences.”
Meanwhile, the 2G/3G market was down 11 percent sequentially and 20 percent year-over-year, kept alive by wideband code division multiple access (W-CDMA) in Japan, Téral said.
As for software, which is where major U.S. operators are headed with their investments, that’s a far steadier and healthier arena. Globally, software revenue grew 17 percent in 2015 over 2014 to top $15.2 billion, mostly driven by LTE-Advanced (LTE-A) upgrades that account for the bulk of fast-growing software revenue. By 2020, “we look for the software segment to grow at a five-year (2015‒2020) compound annual growth rate (CAGR) of 9 percent, surpassing $23 billion,” Téral said.
In fact, he said, software will sustain the entire mobile equipment market until 5G kicks in, creating an inflection point and bringing some much-needed growth—though moderate at best.