Market Insight

RESEARCH NOTE - Stuck in a Funk: Mobile Infrastructure Market Dips 11 Percent Year-Over-Year

December 07, 2016

Stéphane Téral Stéphane Téral Executive Director – Research and Analysis, Mobile Infrastructure & Carrier Economics
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Following is information and insight from IHS Markit about our Q4 2016 Mobile Infrastructure Quarterly Market Tracker

Highlights

  • All indicators point to 2016 being the first year of decline of 2G/3G/4G macrocell deployments
  • Ericsson was dethroned as king of the macro 2G/3G/LTE radio by Huawei in Q3 2016
  • The shift from hardware to software in the mobile infrastructure market is well underway 

Our Analysis

The malaise in the mobile infrastructure market continued into the third quarter. Dragged by all regions, global macrocell mobile infrastructure revenue fell 11 percent in Q3 2016 from the year-ago quarter (Q3 2015), to $10 billion, confirming that we have entered the post‒Long Term Evolution (LTE) peak era. And despite some activity in China, Japan and North America, the market also declined on a sequential basis, falling 4 percent from Q2 2016.

LTE was somewhat a bright spot in Q3 2016; the segment was down 3 percent year-over-year, but up 1 percent quarter-over-quarter driven by evolved universal terrestrial radio access network (E-UTRAN), which rose 3 percent. China was once again fairly strong for LTE, but nowhere near last year’s heights.

2G/3G was down 11 percent sequentially and 20 percent year-over-year, kept alive by wideband code division multiple access (W-CDMA) in Japan.

Despite the weak quarter, there were some market revenue share shifts. For macro 2G/3G/LTE radio, Huawei took the lead from Ericsson. Ericsson is now number two, followed closely by Nokia. It’s worth mentioning that Nokia remained in the LTE market driver’s seat with 34 percent share, ahead of Huawei.

Turning to the software that goes with 2G, 3G and 4G networks, it’s looking far steadier and healthier than hardware. Globally, software revenue grew 17 percent in 2015 over 2014 to top $15.2 billion, mostly driven by LTE-Advanced (LTE-A) upgrades that account for the bulk of fast-growing software revenue. And by 2020, we look for the software segment to grow at a five-year (2015‒2020) compound annual growth rate (CAGR) of 9 percent, surpassing $23 billion.

The transition to software is happening, and software will sustain the entire mobile equipment market until 5G kicks in, creating an inflection point and bringing some much-needed growth—though moderate at best. Look for our new 5G forecast in our next (Q1 2017) mobile infrastructure update.

Mobile Infrastructure Report Synopsis

The quarterly IHS Markit mobile Infrastructure report tracks more than 50 categories of equipment, software and subscribers based on all existing generations of wireless network technology, including radio access networks (RANs), base transceiver stations (BTSs), mobile softswitching, packet core equipment and E-UTRAN macrocells. The report provides worldwide and regional market size, vendor market share, forecasts through 2020, deployment trackers, in-depth analysis and trends.

Geography
Global
Research by Market
Mobile & Telecom
Category
Mobile Networks
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