South Korea-based Samsung and Chinese vendor ZTE are investing heavily in technology and infrastructure for 5G, more so than they did for 4G, pitting them against the traditional trio of network players – Nokia, Ericsson and Huawei. But are they really in a position to shake up the status quo?
Full speed ahead
ZTE has been playing a much larger role in the development of 5G specifications than any previous mobile technology. The company doubled its R&D spending on 5G in 2016 to $400 million and assigned 1,600 people to work on the technology at four dedicated research facilities in China, Europe and the US.
At the Tokyo Bay 5G Summit in May, Wang Xinhui, director of wireless standardisation at ZTE, told Mobile World Live (MWL): “In the past we were simply less mature. With 2G and 3G, and even with 4G, we weren’t that big. But in the era of 5G, we were well prepared. We’ve spent a huge amount of money and devoted so much human resources, particularly towards the New Radio specifications.”
According to Peter Jarich, chief analyst at Global Data Technology: “new entrants have an opportunity to push into accounts where they can position the next generation of technology as a natural breaking point requiring new expertise and infrastructure. Against this backdrop, it makes sense for ZTE to push on 5G in the way they pushed on the 4G opportunity.”
The same can be said for Samsung, which has been working on 5G since 2012 when it began its first mmWave research and development, and believes strong 5G infrastructure will help the consumer electronics giant to achieve its aim of “connecting everything”.
It set its sights on becoming a top-three player in the 5G infrastructure market, forecasting network equipment sales to more than triple to KRW10 trillion ($8.6 billion) in 2022.
The world’s largest smartphone maker aims to pick up network market share by moving quickly and targeting the US market, which is moving ahead on 5G and where Asian rivals Huawei and ZTE face a de facto ban on selling networking gear due to security concerns by the government.
In May, Samsung partnered with Verizon for what was claimed to be the world’s first field trial of a multi-vendor, pre-standard, 5G network and a month earlier the company said it passed an important milestone on its path to 5G with the commercial release of a Radio Frequency Integrated Circuit.
Most recently, UK communications infrastructure company Arqiva and Samsung announced the first field trial of ‘5G’ Fixed Wireless Access technology in Europe was live in central London.
At a launch event, Woojune Kim, VP and head of next-generation business and products at Samsung Networks, told MWL the company is “pretty confident” about becoming a major network player, adding it is helped by the fact its “Finnish and Swedish competitors are struggling”.
This is evidenced by the fact Ericsson just last month said it is set to make further redundancies and reduce its real estate footprint as part of a SEK10 billion ($1.2 billion) round of cuts, as it revealed it remained in the red during Q2 following a 164 per cent year-on-year drop in net income.
What’s more, the CEO of more robust network rival Nokia, Rajeev Suri, said 5G was accelerating much faster than anticipated and suggested the rapid development could create some near term risks for his company, with the timing of certain project completions now uncertain.
Who rules the roost?
So who is on top right now in today’s 4G world? It’s a toss-up between Nokia and Huawei.
Dimitris Mavrakis, research director at ABI Research, said Huawei has dethroned Ericsson as market leader, controlling almost 30 per cent of the 4G market.
“This trend will continue as subsequent improvements to 4G (e.g. gigabit LTE) and early 5G deployments are expected to be overlayed on top of existing 4G networks…According to our estimates, Ericsson and Nokia are similar in terms of market share, with a slight Ericsson lead,” he said.
On the other hand, IHS Markit data shows Nokia is number one when it comes to 4G, followed by Huawei (see image below, click image to enlarge).
In either case, as Mavrakis said: “Samsung and ZTE follow from afar.”
That doesn’t mean they aren’t trying desperately to catch up, though. Kim said it was strategically crucial for Samsung, looking to “connect everything” via IoT, to make “a very strong approach into network infrastructure”.
He explained that while Samsung Electronics is split into three units, consumer electronics, devices and IT & mobile communications, it is the latter which is gaining the most significance in recent times and will be the glue that holds all three together.
And it is Samsung’s experience in these areas that will help its efforts. As a Forbes report from May pointed out: “What sets Samsung apart from others in the industry is that it is an experienced player across many industries including wireless infrastructure, chip manufacturing, semiconductor fabrication and user devices. Samsung can effectively make almost everything in a 5G connection from one end to the other, and it has experience in virtually every segment of 5G.”
Meanwhile Kim claims Samsung is the most profitable of all the players: “though we don’t announce those earnings separately. We are very confident on that aspect…we are pushing along very aggressively.”
But will Samsung and ZTE ever be able to dethrone the current top players?
As Jarich pointed out: “there’s only so much total share they can grab: since 3G and 4G will live for a while. However, as incremental spending moves to 5G, that’s the opportunity they’re targeting.”
“Beyond product strengths, however, an ability to support their customers with the right technical services, managed services and end-to-end solutions will be the main consideration for how much share they can grab,” he added.
It would be bold to say Nokia and Ericsson, despite its troubles, and Huawei will be dethroned any time soon, but Samsung and ZTE are certainly making waves and giving their rivals reason to sit up and take notice.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.