According to a report by Dell’Oro Group, global telecom equipment revenues across six telecom categories – broadband access, microwave and optical transport, mobile core network (MCN), radio access network (RAN), and service provider (SP) router and switch – declined 5 per cent year-on-year (YoY) for the full year 2023, performing worse than expected.
As per the report, there are multiple forces at play. First, challenging comparisons in some of the advanced 5G markets with higher 5G population coverage taken together with the slow transition towards 5G standalone (SA) helped to partially explain steep declines in wireless-based investments. This capex deceleration was not confined to the RAN and MCN segments. Following a couple of years of robust passive optical network (PON) investments, operators were able to curtail their home broadband capex as well. This reduction was more than enough to offset positive developments with optical transport and SP routers. Renewed concerns about macroeconomic conditions, forex, and higher borrowing costs are also weighing down prospects for growth.
The report finds that North America subsided faster than expected. Initial readings show that the aggregate telecom equipment market dropped by roughly a fifth in the North American region, underpinned by weak activity in both RAN and broadband access. Meanwhile, regional dynamics were more favourable outside of the US. The worldwide revenues excluding North America advanced in 2023, as positive developments in the Asia Pacific region were mostly sufficient to offset weaker growth across Europe.
According to the report, supplier rankings were mostly unchanged; however, vendor revenue shares shifted slightly in 2023. Still, the overall concentration has not changed – the top seven suppliers accounted for around 80 per cent of the overall market. One major theme across the various telecom programs is that despite ongoing efforts by the US government to limit Huawei’s addressable market and access to the latest silicon, Huawei still maintains its position as the global telecom equipment leader. Huawei’s lead widened in 2023, in part because its limited exposure to the North American region was a benefit in 2023 on a relative basis.
The report concludes that market conditions are expected to remain challenging in 2024, though the decline is projected to be less severe than in 2023. Dell’Oro Group forecasts global telecom equipment revenues to contract by 0 to -5 per cent in 2024.
