SAN JOSE, Calif. — Despite enthusiasm over 5G, spending on cellular base stations will continue a significant decline over the next three years before returning to growth in 2021, according to a new report from Dell’Oro Group.
The report is roughly in line with the outlook from infrastructure giant Ericsson that reported worse than expected quarterly results. Dell’Oro predicted a high single-digit percentage decline in base station sales this year followed by two years of declines in low single digits. Ericsson expressed hopes that the market would be flat in 2019.
The news underlines the precarious position for wireless vendors. They are making significant investments now in 5G technologies and services while navigating the end of major 4G deployments.
“The lull is impacting all regions and all vendors, impacting all three leading vendors, although so far, Huawei has weathered the downturn better than Ericsson and Nokia,” said Stefan Pongratz, a senior director and analyst at Dell'Oro. “We see some promising signs in North America, but the China market is expected to contract 2017, and Europe will overall see a near-term decline.”
For its part, Ericsson reported a $145.3 million second-quarter loss, with both sales and gross margins below consensus forecast, according to a Reuters report that said the company will make cuts of about a billion dollars.
The rapid rise of LTE, especially in China, drove base station sales to a peak of $33 billion in 2014. Since then, annual sales have fallen nearly $4 billion and will fall nearly $6 billion more before they nudge up in 2021, fueled by sales of 5G macro base stations and LTE small cells, said Pongratz.
Market watcher sees $10B revenue decline 2014-2020 for base stations as mainly LTE small cells get traction.
“Cumulative radio-access network revenues between 2017 and 2021 are expected to represent the weakest period since we started tracking the market in 2000,” he said. “We’ll see some upgrades to LTE Advanced and Advanced Pro, but upgrade phases typically do not result in growth; they offset declines in macro base station volumes.”
Initial 5G deployments will be for macro base stations in frequency bands below 3 and 6 GHz, with 5G small cells for urban environments quickly following. Millimeter-wave services will account for less than 5 percent of carriers spending on 5G market by 2021.
Although small-cell revenues will quadruple from 2017 to 2021, most of that spending will be for LTE units, said the report. Traditional macro systems still make up more than 95 percent of the base station market, said Pongratz.
The initial 5G rollouts are aimed at expanding existing mobile broadband capabilities for smartphone users. “There’s no question that’s driving the market today and over the next couple of years.”
5G aims to enable two major new uses — massive deployments of devices for the Internet of Things and ultra-low latency services. However, “the impact of those new drivers remains uncertain,” said Pongratz.
— Rick Merritt, Silicon Valley Bureau Chief, EE Times