Now 3 generations of (high-end) 5G chipset and the market is expanding
In 2019 and 2020, the 5G chipset market has seen several announcements that points to both an increased maturity and competition on the market. While Qualcomm has announced its third generation discrete 5G baseband aimed at the high-end portion of the market, in February 2020 and called the X60, it is only now that devices based on this generation are to be launched on the market.
In the meantime several mid-end 5G chipsets have been announced, not only by Qualcomm, but also its competitors and the end of the year has even seen the release of even lower-end chipsets such as the Mediatek Dimensity 720 that is powering the cheapest 5G phone, the Oppo Realme v3, at 146 USD (in China) or the Snapdragon 480 (announced at the beginning of 2021).
While first integrated 5G SoC announced can be dated back to September 2019 with the Samsung Exynos 980, followed by Huawei/HiSilicon Kirin 990 5G, all targeting the high end market, the end of 2019 and the course of 2020 has seen several other 5G SoC announced and launched by Qualcomm (SD765/765G with its updated version the SD 768), Huawei (Kirin 820 and 985 5G), Samsung (Exynos 880) and Mediatek (Dimensity 1000L and 1000+ as well as the lower end Dimensity 820; 720, 700). This is not anecdotal as the gist of the new chipsets announcement are now System on Chips integrating one baseband with capabilities adapted to the price tear of the targeted device . This can be seen in the figure below that shows there are now more 5G SoC than discrete 5G baseband on the market and that this trend has only expanded since our last update in September 2020.
While those new lower tier chipset have initially had in common the fact that they only supported the sub-6 GHz frequency range, this has started to change with the introduction of Qualcomm Snapdragon 480 a further indication of the ever evolving market. Indeed, limiting 5G chipset to sub 6 GHz is a way to reduce the Bill of Material (BOM) and make it more adapted to both lower tier segments and markets where mmWave is not yet available. However, as mmWave is slowly being introduced in more markets than just in the US (South Korea, Japan, Russia) limited support for mmWave in lower end 5G chipset now can be seen, the SD480 being the first to feature this capability. Announced on the 4th of January 2021, the SD480 support both sub 6 GHz frequency bands and mmWave, albeit with some limitations:
- Bandwidth limited to 200 MHz in the mmWave for 2.5 Gbps maximum 5G throughput
- No cross carrier aggregation between mmWave and Sub 6 GHz spectrum
As of the end of November 2020, around 40 5G chipsets had been in development or released but at the same time, only 29 chipsets could be considered as commercially available (7 from Qualcomm, 6 from Huawei, 5 from Samsung 9 from Mediatek and 2 from UniSoc). As of end of September 2019, we reported only 5 of them and only 8 at the end of December 2019.
It is to be noted here that in this count of 5G chipset. Discrete 5G modem that are not sold separately, such as the X52 or x51 Qualcomm modem are not included, even though, as such they could be considered as modems.
Presentation of announced 5G chipsets
Source: IDATE DigiWorld, December 2020
What differentiates those chipsets?
The number of features sometimes makes it difficult to differentiate all those chipsets and indeed a lot is shared on the paper. Below are the features where 5G chipset might differentiate:
- Support for Standalone mode (SA). While the 1st generation of 5G modem only supported the Non Standalone mode, all 5G chipset now support both NSA and Standalone mode, this way of deploying 5G that make it independent from 4G and where both the user plane and the control plane are handled by a native (and virtualized) 5G The existing of NSA only device on the networks explain why SA won’t simply replace NSA but will likely coexist for some years to come.
- Capability to aggregate up to 2 carriers of 100 MHz (FDD and TDD) in the sub 6 GHz frequency band: this enables increased performance in the sub 6 GHz, as early chipset were not capable of aggregating FDD and TDD spectrum, which is quite common to have for a Lower end 5G chipsets have today limited carrier aggregation capabilities. While higher end chipset can aggregate up to 800 MHz in the mmWave bands, some are more limited (e.g. SD480 supports up to 200 MHz in the mmWave and 100 in the sub 6 GHz).
- Capability to aggregate sub 6 GHz and mmWave spectrum for increased maximum throughput up to 7.5 Gbps (Qualcomm x60). This is especially important for increased coverage and will ease the transition for operator from NSA to SA.
- Support for mmWave bands: Because the deployment in those frequency bands has so far been limited outside Verizon, the absence of support for mmWave is not an issue and an opportunity to develop lower end / cheaper 5G chipset, while still providing an enhanced user experience over 4G. MmWave bands however have started to be deployed outside the US in the 2nd half of 2020 and should also be introduced in Europe in 2021.
- Support for DSS (Dynamic Spectrum Sharing) feature, which enables the dynamic deployment of 5G in 4G bands, as standardized within 3GPP (instead of dedicating fixed portion of spectrum to RAT as was usually done with While absent from early generations of 5G chipset, DSS is now commonly supported.
Those capabilities differentiate chipset between each other and often between the different generations of 5G chipsets.
State of the competition
The 5G baseband market is quite different from the 4G and earlier generation baseband market. Actually, each new generation of cellular technologies has seen a player leaving the market and a new one emerges. As an example, TI left the baseband market with 3G and Infineon sold its cellular asset to Intel. In 4G, several players left the baseband market, such as Broadcom, despite several acquisition or Fujitsu. With 5G, Intel was the first to leave the (device) baseband market by selling its cellular assets to Apple. Due to the economic war between the US and China, the future of Huawei chipsets, with the inability to rely on TSMC foundry 5nm process starting on 15th of September 2020 is also uncertain.
In 5G Qualcomm is still considered the leader in market share but recently, the rise of Mediatek with its Dimensity range of 5G modem, now commercially available is somehow changing the competitive landscape and this is particularly true in China where tensions with the US put Huawei in a difficult situation regarding its chip design capabilities. While Counterpoint Research estimates Qualcomm market 5G smartphone market share to be around 39% of the sold in Q3 2020, Mediatek has been growing dynamically throughout 2020. In Q3 it even surpassed Qualcomm on the global smartphone chipsets market, benefiting from the growth in China and India.
While Samsung and Huawei, number one and two in the smartphone market have initially used their chipset internally, this situation has changed throughout the time, as both chipset manufacturers have been mentioned as selling their chipset to other device manufacturers, mostly Asian ones. In a not so distant future, they will both be joined by Apple, after the Cupertino company acquired Intel cellular assets for mobile devices. For now, Qualcomm is still benefiting from this situation, since Apple is not currently capable of using its own silicon for 5G connectivity and has inked a licensing deal with Qualcomm to use their 5G products. The new iPhone 12, which is powered by Qualcomm x55 5G modem has positively impacted latest financial results from Qualcomm in the last quarter.
Mediatek is now the 5G challenger for Qualcomm
After a slow 5G headstart, Mediatek has turned into a serious competitor in the recent months thanks to the growth in the very large Chinese market as well as thanks to the difficulties leading Huawei to partly rely on Mediatek 5G chipset in lieu of HiSilicon chipsets difficult to be produced in the context of US restriction on doing business with Huawei. In recent months, Mediatek has been mainly competing on the mid-end and low end 5G chipset market, launching a host of different SoC. For various price ranges. The Dimensity 720 announced in July 2020 for instance power the cheapest 5G smartphone to date, the Oppo Realme v3 which can be found at around 120 EUR in China.
As for Unisoc which announced the Makalu Ivy510 at MWC 2019, it is targeting the (Chinese notably) mid-tier smartphone and IoT market. Unisoc was previously known as Spreadtrum and had a development partnership with Intel for LTE chipset for Chinese devices but the partnership over 5G has been dropped and Unisoc is now following its own route. In February 2020, it announced its 2nd generation 5G chipset, the T7520 SoC, which Unisoc claims as “the all-around leader in power consumption for both light-load and heavy-load scenarios and delivers a power consumption reduction of up to 35% for some data business scenarios.”, a claim, which of course remains to be verified. Unisoc power smartphone commercially available from HiSense, CoolPad and AGM notably, smartphones that are targeting the Chinese market.
Apple to develop its own 5G modem for tighter control and integration
After Intel quitted the smartphone chipset market in April 2019, Apple purchased most of Intel’s 5G business for 1 billion USD with the intent to develop its own 5G baseband. In the meantime, Apple is using Qualcomm 5G modem after it reached a 6 year license agreement as a settlement for the litigation between Apple and Qualcomm. The reason for Apple to develop its own modem is above all the capability to better integrate connectivity capabilities to Apple global ecosystem of devices, not only in iPhones and iPad, for which a homegrown ARM based processor has already been available for many years but also for the rest of its line of computers. In mid-June 2020, Apple indeed announced its choice to transition from Intel x86 architecture to the ARM architecture, something which resulted in the commercial launch of first ARM based Mac computers in November 2020. By mastering and fully controlling the processors of Mac computers, Apple will be able to develop and integrate new features, of which of course 5G connectivity.
It is estimated that Apple owns 5G modems could come to the market around 2023-2025. Such modems are very unlikely to be sold to other OEMs as they are meant to become a differentiating point for Apple. While designing a cellular modem is no easy task, Apple has proven in the past that it could acquire knowledge and competences in the design of new solutions, something that takes time to reach maturity but will in the end serve the interest of Apple.
In October 2020, Apple launched its line of 5G iPhones, using Qualcomm x55 modem.
2. 5G devices announced at the end of 2020
The release of 5G baseband and RF systems is the first step before commercial devices. Usually, when a new radio technology is released, basebands are developed and implemented in relatively simple devices such as mobile WiFi hotspots, before more complex devices such as smartphones, where integration is always more challenging. Before fully commercial devices can be made available, several steps are required.
The steps a device takes to market
Source: IDATE DigiWorld, September 2018
This time, with 5G, Fixed Wireless Access was one of the first use cases, rather than mobile usage and first commercial devices announced have been 5G home routers, such as the one announced by Huawei at MWC 2018 in Barcelona, or the one by Samsung. Those early devices have been more specifically designed for carrier partners Verizon in the US and in South Korea, and have already received their approval from the FCC. Since then, many other routers and CPEs have been released for various usage and with newer 5G chipsets and capabilities.
Example of routers based on Snapdragon 865 (based on 2nd gen x55 5G modem)
Since then, however, the ecosystem has continued its expansion alongside that of the smartphone devices. An illustration of this is the announcement in October 2019 by Qualcomm that over 34 OEMs had planned to use its X55 5G modem alongside a specifically designed for FWA antenna solution.
OEMs planning to launch Qualcomm based x55 5G FWA CPEs
As an indication of the traction of 5G FWA CPE devices on the market, the evolution of the number of 5G FWA CPE devices is available below. Between Q3 2019 and Q4 2019, the number of such devices listed more than doubled and it took nearly one more year after that, between December 2019 and November 2020 for this number to double again. As of end of November 2020, 126 5G CPEs were listed. According to Gsacom, as of the end of September 2020, 37 operators had launched 5G FWA services in the world versus 33 in May 2020.
Growth of the number of 5G FWA CPE devices announced (as compared to 5G phones)
Smartphones and modules, the most popular form factors indicate an already relatively rich ecosystem powered by 5g basebands
But since those early 5G devices designed for fixed wireless usage, the first mobile 5G networks have been launched in the world and the device ecosystem, thanks to the enabling basebands, has “considerably” widened. As of end of November 2020, indeed, Gsacom reported 519 5G devices announced by 104 different vendors and 20 different categories of form factors, some of which are fairly similar. As a comparison, in December 2019, Gsacom reported around 15,000 different LTE devices. Of those 519 5G devices, at least, 303 are commercially available, which is a tripling as compared to May 2020 and a 36% increase as compared to September. It certainly indicates a momentum in the building of the ecosystem.
Growth of announced 5G devices (not all commercially available) as of end of November 2020
Simplified distribution of the 5G device ecosystem as of November 2020
Source: Gsacom, as of the end of November 2020
The fact that smartphones are the 1st category of devices announced together with modules is a noteworthy fact. CPEs and modules, are usually the first devices to go to the market when a device ecosystem is building up but smartphones usually comes afterwards. Between December 2019 and the end of November the number of 5G smartphones has nearly quadrupled.
In detail, most of the devices launched in 2020 have been based on second generation 5G baseband and it is only one year after its announcement that 3rd generation 5G modem will find its place in commercial devices.
While initial 5G devices often had either sub 6 GHz, either mmWave RF system, 2020 has seen first mmWave+sub6 GHz devices. The reason for not including support for both frequencies was to be found in the different geographical/market choices regarding frequency bands for deployment, but also in the cost that those additional frequency bands incur. At this stage, the RF and antennas add a significant toll to the total Bill of Material (BOM) of 5G devices without even talking of power consumption, time has not yet come for worldwide 5G devices supporting all the 5G frequency bands. One important aspect though is that 5G devices that have been released in 2020 now support sub 6 GHz FDD and not just TDD. While TDD mode is important for mid and high frequency bands, FDD is key for lower frequency bands (those frequency bands used for 2G, 3G and 5G). While those bands sport more limited throughput, they are key for 5G roaming, as operator will be vying for expanded coverage and SA deployments.
In 2020, as lower-tier 5G solutions have been released on the market thanks to a wider 5G baseband/SoC portfolio, the premium price for 5G device has continued to decrease. This decrease of price initially comes principally from cost optimizations and “reduced” 5G performance as compared to high-end 5G solutions as exemplified by the difference between the Snapdragon 765 and the x55 modem that is found in the snapdragon 865. The 5G performance of the Snapdragon 765 is still far better than the best 4G possible performance, topping at a theoretical downlink throughput of 3.2 Gbps but is still below the 7.5 Gbps that the x55 is capable of. Likewise, the newly released Snapdragon 480, while supporting both sub 6 GHz and mmWave only supports bandwidth up to 200 MHz, in the end “only” providing up to 2.5 Gbps downlink throughput in 5G (vs 660 Mbps in LTE). Of course, this differentiation doesn’t really matter when the capabilities of the network do not even match this level of throughput.
“5G ready” smartphones are going to be marketed
An interesting thing to notice is the fact that because of longer replacement rate in some countries (closer to 4-5 years than 2 years) for smartphones, some MNOs will rather sell 5G-ready devices (i.e devices supporting 5G even though 5G has not yet been deployed in the network) than 4G only device. The rationale for this carrier demand is to be able to switch as many users as possible on the less-costly 5G network when it is deployed. In countries where 5G launch are imminent, the same decision could be taken by operators and also device manufacturers that want to be able respond to the consumer demand not to invest in 4G phones when 5G is coming soon. The newly released iPhone 12, mini, 12 pro and 12 pro max is a good illustration of that. Indeed, in countries where 5G has not been launched, the same version of the device will be sold but with 5G deactivated.
The 3.5 GHz frequency band, not mmWave is the most popular frequency bands for 5G
Despite much noise around mmWave bands deployment abroad, the sub 6 GHz device ecosystem is doing strong and especially the 3.5 GHz band which provides interesting capabilities with a mix of coverage and capacity when wide bandwidth configurations are used (100 MHz). More precisely, the n78 band (3.5 GHz) is the most popular frequency band in terms of devices announced mirroring the sizeable number of networks believed to use this frequency band. As of end of November 2020, 57% of devices announced or in development supported this frequency band vs 30% for all mmWave bands. Given the wide availability of this frequency band worldwide, this is not a big surprise. While not providing as much bandwidth as mmWave bands (largest possible bandwidth configuration is 100 MHz) it is providing a much larger coverage. As compared to lower frequency bands, it still sports better capacity and is better suited to massive MIMO deployment in the field because of the much smaller antennas required.
Thanks to features such as Dynamic Spectrum Sharing (DSS), a 5G device ecosystem for “legacy frequencies” is also being built with devices announced supporting several of those bands (such as the much used 1800 MHz, 2100 MHz or 700 (APT) MHz) especially as operators in the US (AT&T and Verizon but also T-Mobile without DSS) have started to deploy in those low bands in 2020. During the last three quarters, the number of devices supporting those frequency bands has grown substantially indicating a clear interest from operators in those frequencies as they prepare to leverage their existing asset in complement to mid frequency band. In 2021, the support for sub 6 GHz carrier aggregation should further drive the support for those bands including in Europe.
Not surprisingly again, much of the mmWave device ecosystem is driven by the need to support US 5G networks but this has started to change in 2020 as other mmWave deployments have taken place during the second half of this year in countries such as Korea and Japan. While no devices had been announced for n258 (26 GHz) band in December 2019, (the mmWave frequency of choice in Europe (and China) for latter deployments), this band has humbly jumped from 0 to 3 devices in March 2020 to 5 at the end of May 2020, and now 8 by the end of November which for now still remains anecdotal. In 2021, the ecosystem for mmWave devices should continue to build up as more countries, including in Europe will start to deploy some mmWave networks. In the last two months, the growth dynamic for mmWave devices has come from the n261 bands used by Verizon Wireless.
Distribution of announced 5G devices by range of frequency band
Source: gsacom, halberdbastion and IDATE * Note that one same device might be listed several times in different category when supporting several bands at the same time
3. Infrastructure ecosystem
Infrastructure equipment is probably even more important than devices in the early building of an ecosystem, as they are used to test the technology features and concepts, even as the technology is being standardized within 3GPP. Equipment vendors were early in announcing their effort in building 5G technology, often by announcing trials efforts with Mobile Network Operators and/or chipset manufacturers. Those demonstrations were often focused on pieces of technologies or concepts, such as Massive MIMO, the use of mm-wave in different mobility scenarios…
Industry efforts have now resulted in early (and accelerated) standardization of the technologies and as more than 120 operators have commercially (as of mid-November 2020) launched a 5G network throughout the world, most equipment vendors have completed their 5G portfolio to meet the various needs of the market. Those solutions share more or less the same features, although each vendor has designed its solution around its main strength. These features are:
- 3GPP Release 15 compliance: Release 15 is the first official release of 5G. Before that, some equipment vendors have worked around unfinalized versions of the standard, or as is the case of network operators having built a pre-standard (such as Verizon with the 5GTF). As the Release 15 of 3GPP has seen its specs frozen, infrastructure equipment now highlights their full Rel. 15 compliancy.
- End-to-end offering: in the race to being the most advanced vendor, it is important to show full end-to-end product portfolio, which means having a core network solution, a transport solution, a base-station adapted to different scenarios (e.g. such as indoor or outdoor), and a “front-end” solution with diverse antenna
- A (virtual) core network solution: this is built to be deployed in the cloud for maximum flexibility and to support the deployment of certain network functions at different places in the network, in a centralized or more or less distributed (up to the edge of the network)
- Support for massive MIMO: Massive MIMO, beam forming and beam tracking and beam steering are key features to attain increased spectrum efficiency in 5G. The support of this feature is thus key for equipment vendors to assert 5G
- Support for sub 6 GHz and mm-wave: While mm-wave has received much of the attention in the race to 5G because of all the challenges associated in operating a radio network in these frequency bands (the 26 and 28 GHz bands notably), but C band below 6 GHz has also seen traction because of its roaming capabilities for 5G. In Europe, nearly all 5G deployments that have already taken place have been in this band rather than in the 26 GHz band, because of its better coverage capabilities and the feeling of operators that they are not yet running out of capacity (as compared to the U.S. for instance).
As Release 15 is now fully supported by equipment vendors and as first 5G Standalone Network with a native 5G core have been launched by the end of 2020, Release 16 is about to be finalized. Initially supposed to be frozen in March 2020, the next Release of 5G has seen its frozen date postponed to June 2020 due to COVID-19 epidemic. It should now be completely finalized by the end of this year and first compatible equipment should be launched shortly after.
Release 16 is considered as the phase 2 of 5G and is aimed at complementing the previous release after the initial calendar was quicken to enable early 5G deployments. Release 16 brings the following capabilities:
- NR-U: it will now be possible to deploy 5G NR in unlicensed spectrum, not only with an anchor in licensed spectrum but also as This is notably aimed at serving the development of 5G private networks. NR-U will also make it possible to have an anchor in unlicensed spectrum.
- URLLC: While Release 15 focused on eMBB use case, Release 16 will support ultra-reliable low latency communication for critical applications. It is notably aimed at serving the needs of the Industrial
- Improvement to CV2X communication with support of communication directly between the vehicles under and out of coverage thanks to PC5
- Integrated Access Backhaul: to support the densification of the network when fiber is not easily available, it will be possible to use a NR wireless link from central locations to distributed cell sites and between cell
- Other enhancements to existing features: Massive MIMO, Dynamic Spectrum Sharing but importantly as well for devices energy saving features (Wake Up Signal, adaptive MIMO Layer reduction, low power carrier aggregation control …)
The figure below present the update roadmap for 5G standard development:
5G standard development roadmap
Presentation of the 5G portfolio of the main equipment manufacturers
Below, we present the 5G portfolio of each equipment manufacturer. Their claim is mostly similar and as for device baseband, those claims can be seen through different angles. Table 12 below summarizes what stands out from each vendor solution:
Infrastructure equipment 5G solutions from major vendors
Source: IDATE DigiWorld, June 2020
Open RAN and the expected rise of new network vendors
As the native 5G core network will be fully virtualized, the virtualization of the Radio Access Network (RAN) and the development of new RAN architecture is paving the way for the implementation of open and interoperable solutions on the network.
Initially pushed by MNOs to end their dependency on one or two single equipment provider it has been seen as an opportunity for new players to enter the RAN market with software solution while traditional equipment vendors excepting Huawei have been forced to more or less timidly supporting the movement to continue working with some Tier 1 mobile operators.
Mapping of new equipment vendor
Source: IDATE DigiWorld
In support of the development of a standardized interface between the different equipment that make up the RAN, alliances have been formed such as the TIP (notably) or the ORAN Alliance. More recently and in a more political approach, the Open RAN Policy Coalition has been formed in the US. Indeed, in the country, with no more mobile infrastructure equipment vendor on the market, the move is seen as way to rebuild a presence for infrastructures also considered as strategic for the independence of the country.
While still relatively limited in its breadth this move should be seen as a solid trend for the years to come. While “legacy” equipment vendors have initially developed a virtualized RAN solution, those solutions remained proprietary and did not provide the openness that operators had been calling for.
Recently, certain move by both greenfield operators and legacy operators have shown that the ecosystem was moving in the right direction. If the launch of Rakuten fully virtualized 4G network in Japan is being observed carefully, massive testing by major telcos such as DoCoMo in Japan, Etisalat in UAE and Telefónica are also an indication that Open RAN is there to stay.
At this point of development, Open RAN solution still lack maturity as compared to more integrated and proprietary solution as it require new (IT) competencies that few operators have yet. One issue with Open RAN today lies in the fact that, as operators are deploying a new Radio Access Technology, they also need to have an end to end control of what is happening in the network (especially as network slicing is seen as a way for operators to transform their business model). The more vendors solutions are deployed in the network, the more difficult it is to identify where error come from when they arise.
In the years to come thus, new equipment vendors are going to continue to progress on the market but biggest “legacy” vendors are not yet threaten, even though they need to rethink their positioning.
Presentation of main new equipment vendors
Source: IDATE DigiWorld
5G expanding into lower frequency band for increased coverage (and capacity)
In 2020 and beyond, after early deployments, 5G has expanded its coverage thanks to lower frequency bands. This would not have been possible without flexible solution such as Dynamic Spectrum Sharing (DSS) which enable to seamlessly and dynamically “refarm” 4G spectrum for 5G application. Instead of dedicating a fixed portion of a frequency band to 4G or 5G, the idea is to support both 4G and 5G users in the same frequency band. It is especially useful for sub 3.5 GHz bands used by 4G (the mid and low frequency bands of 5G) as it will expand 5G coverage outside the spotty area where
“higher band 5G” has been deployed. This feature is part of 3GPP Release 15 and while its support has been announced first by Qualcomm with its x55 5G chipset at MWC 2019, it is supported by all the 5G baseband players as well as most equipment vendors which have announced support for this feature. Ericsson is today considered as a leader but Samsung, Nokia, ZTE have all released their solution. Quite uniquely, ZTE supports the deployment of a third radio access technology such as 2G or 3G together with 4G and 5G.
It should not be seen as a way to deploy 5G in a single band but as a way to increase throughput in low frequency bands where little bandwidth is available. DSS is thus meant at being used in carrier aggregation configuration. In the very low frequency bands such as in the 600 MHz or even in the 700- 800 MHz band, the spectrum available is often quite limited and as such offer very limited performance.
It is to be noted that while the solution seem interesting on the paper, as every new technology, it also needs some maturation. Indeed, it has been reported that some DSS solution could incur a reduced spectrum efficiency on the 4G part of the spectrum. As a result from this initial situation, some operators could initially decide to allocate fixed portion of their spectrum to 4G and 5G instead of dynamically managing the allocation of resource depending on the network load.
Quite importantly as well, the support for low frequency bands in 5G will be critical for the launch of Standalone 5G, where the native 5G Core network will be able to handle the control and signaling plane, thus paving the way for more advanced/transformational 5G capabilities such as network slicing.
Outlook for 5G features deployments worldwide
The increasing importance of semiconductor in building a differentiated portfolio
With the ever complexification of radio technologies, and in a very competitive environment, the chipset within the infrastructure is increasingly becoming a matter of differentiation. But as most of the main equipment manufacturers are today claiming to somehow design their own chipset, making bad choice can decisively impact competitiveness as recently experienced by Nokia.
Nokia indeed introduced its 1st generation of ReefShark chipset in January 2018 touting its capability to enable the reduction of massive MIMO antennas by a factor of two while reducing the power consumption of baseband unit by 64%, a key benefit as both size, weight and power consumption have a direct impact on operator OpEx. However, in order to achieve this prowess, Nokia made a chip design choice that put the Finnish vendor in a difficult position. Indeed, by making the decision to use FPGA, a programmable chipset, rather than a dedicated ASIC, Nokia actually quite negatively impacted its product margin. FPGAs indeed, provide flexibility by enabling to reconfigure the chip after it has been designed, something that Nokia believed to be an advantage. But that turned out to be a serious disadvantage as FPGAs are more expensive than ASICS and the time to market that this design choice was supposed to bring disappeared as one of its supplier experienced difficulties in the manufacturing of the chipset with its 10 nm foundry process. Nokia finally departed from this design choice by finally designing a more competitive SoC through partnership with silicon specialist such as Broadcom, Intel and Marvell for its range of product. This turn of event however quite negatively impacted Nokia’s competitiveness. As of March 2020, Nokia indicated that 17% of its 5G products were powered by Reefshark with the objective of reaching 35% by the end of 2020, 70% by the end of 2021 and 100% by the end of 2022. At the end of Q3 2020, Nokia reported that 37% of its 5G shipments were powered by ReefShark
Meanwhile, Huawei launched its 1st generation of own 5G base station processor called Tiangang in 2019, while Samsung launched its 2nd generation of base station chipset the same year. While other vendor Ericsson and ZTE are also said to design their own processors, they also ended up partnering with silicon specialist Broadcom and Intel.Because of the limited margin in the industry and the pressure on price that Chinese vendor Huawei has been able to impose, every point of margin is key, either to reinvest in Research and Development, either to more aggressively compete on prices.
5G infrastructure contracts announcements
In the race to 5G contracts for equipment manufacturers, it is sometimes difficult to say who is really winning so far because of not all the figures being released and made public, not at the same time and sometimes as well with no precision on the scale of the contracts. To make it worse, the situation seem to change quite rapidly as exemplified by Nokia figures. As of December 2020, Nokia had secured 187 5G commercial engagements, 138 commercial 5G deals and 44 live 5G networks contracts Roughly one year ago, we stated that Nokia was considered to be trailing behind in terms of contracts, Nokia, however, stating that they were leading in terms of the comprehensiveness of the 5G solution sold to operators: “More than half of the deals that we have signed actually include more than just radio”. It is to be noted here that those deals likely include enterprise customers, 5G Private networks being known has having been a particular focus for Nokia.
As of end of December 2020, Ericsson states that it currently has 122 5G commercial agreements or contracts with unique operators out of which 71 have been publicly announced and out of which 77 are live 5G networks. As for Huawei, it claimed 91 5G contracts globally but this was in February 2020 Huawei since then has given no update to those figures In Europe, Huawei claims to have more than 46 commercial 5G contracts signed and to have shipped 120,000 5G base stations.
While the American ban on Huawei has been seen as an opportunity for its competitors it has not prevented the Chinese infrastructure vendor to claim the leadership in the past but this is something that is difficult to follow over the time. Looking at overall market share of telecom equipment revenues, it is still considered globally that Huawei is leading, with, according to Dell’Oro a 30% market share during the first 9 months of 2020, as compared to 15% for Nokia and 14% for Ericsson. Despite difficulties in Europe, the market dynamic in China is helping Huawei to strengthen its position. Together with ZTE, it is estimated that Chinese equipment manufacturers hold 41% of the market in revenues.
Network contracts announcement by infrastructure vendors – September 2020
Source: IDATE DigiWorld