Numerous factors continue to limit growth in the global telecom equipment market, and that will continue, Dell’Oro said.
According to market research firm Dell’Oro Group, the global aggregate telecom equipment market expanded by only 3% in the first half of this year, slowing from the 7% gain seen in the first half of 2022.
The research agency predicts the market to rise by roughly 4% in 2022, as areas with room to develop—particularly broadband access equipment, but also 5G—continue to compensate for sluggishness in other sectors.
Issues such as component shortages, the strengthening of the U.S. dollar against other currencies, suppliers exiting the Russian market, uncertainty in the 5G market, and slower wireless activity in Japan and India combined to limit growth opportunities in the first half.
“While the deceleration was expected going into 2022, the slowdown in the second quarter was a bit steeper than expected as surging demand for broadband equipment was barely enough to offset tepid Y/Y developments in RAN, optical transport, and routers,” said Stefan Pongratz, vice president at Dell’Oro Group, in a statement.
Meanwhile, supply constraints and rising inflation have not had a negative effect on the size of orders network operators are placing with their vendors, according to Jeff Heynen, vice president of broadband access and home networking at Dell’Oro.
“We are not seeing order sizes decrease and, in some cases, orders have been increased so that operators can be assured of having equipment once lead times finally shrink,” Heynen commented via email. “I am seeing this in the case of FTTH equipment, particularly ONTs, as well as residential gateways with Wi-Fi 6 and 6E. If operators are in the process of building out fiber infrastructure now, they certainly don’t want to be in the position of telling customers who sign up for service that they can’t be connected due to a lack of ONTs.”
In the broadband access segment, Heynen stated that investment in cable, DSL, Fixed Wireless CPE, and PON was $8.5 billion in the first half of 2022, and the industry has yet to see the majority of spending that might be driven by government financing programs.
“At this point, the bulk of the subsidies through RDOF, BEAD, and other national initiatives haven’t flown through to the equipment vendors yet,” Heynen said. “That money will really start to make an impact beginning next year through 2026. However, the pending distribution of subsidies is forcing other ISPs, including cable operators, to accelerate their network upgrade plans to stay ahead of any expansion projects. So right now, there is more of an indirect acceleration of demand rather than direct increase due specifically to funding.”
Regionally, the entire market was stronger in North America, where equipment revenue climbed by a double-digit rate in the first half of 2022 compared to the previous year, and in China, where revenue increased by a high single-digit pace. After two years of healthy growth in telecom equipment revenues, Europe has seen a downturn, aided by the withdrawals of players such as Nokia and Ericsson from Russia, as well as the stronger U.S.