Wireless infrastructure vendors may not get a pass in this recession like some had predicted. ABI Research has released new market data this week that projects the global radio access market to contract by 6% this year, falling to $49 billion.
In January, Ericsson CEO Carl-Henric Svanberg proclaimed that the mobile equipment industry was not in telecom crisis, though other equipment sectors–particularly handsets–were feeling the pinch. Despite the battered economy and dried-up capital markets, Svanberg said, mobile operators were still investing in their networks. Motorola’s Q4 network revenues seemed to back up Ericsson’s claims, largely on the strength of Moto’s WiMAX sales, but Alcatel-Lucent and Nokia Siemens Networks weren’t so rosy in their predictions. Even Ericsson’s positive outlook was clouded by the 5000 layoffs.
In comparison to telecom industry overall, a 6% contraction isn’t so bad. Alcatel-Lucent estimated that the overall telecom equipment market could fall as much as 12% this year. It’s interesting to see, though, where ABI thinks that $49 billion will be spent. 2G and 3G deployments are reaching maturity worldwide, which would imply that spending will now shift to 4G technologies like LTE and WiMAX. But ABI doesn’t expect 4G capex to really ramp up until 2011. Rather 3G deployments in the developing world will be bright spots in the infrastructure market, particularly 3G builds in India and China. ABI also said that upgrades of current UMTS networks to evolved high-speed packet access (evolved HSPA or HSPA+) will provide more incremental value to established carriers than outright 4G deployments.
The growth from new contracts, however, will be mitigated by increasing price competition, ABI analysts said. Not only is rivalry between the big western vendors intensifying in the down economy, Chinese vendors are adding to the pressure. “Huawei in particular has been moving up the ranks,” ABI senior analyst Nadine Manjaro noted. “In 2005, Huawei held just 5% of the market. In 2008, it chalked up nearly $18 billion in telecom sales. As a result, the firm moved into third place with 12.5% of the wireless infrastructure market. This is an extraordinary achievement.”