Following two years of decline and stagnation, global spending on wireless infrastructure gear is set to return to growth in 2011 as carriers migrate their networks to newer-generation technologies.
The worldwide wireless infrastructure equipment market is projected to generate growth of 9.1 percent in 2011, with revenue rising to $42.5 billion, up from $38.98 billion in 2010, according to the IHS iSuppli Mobile & Wireless Communications Service at information and analysis provider IHS (NYSE: IHS). This healthy expansion follows a 7.2 percent decline in 2009 and essentially flat revenue in 2010. IHS forecasts that global spending by wireless carriers worldwide on wireless infrastructure equipment will grow at low single-digit rates through 2015, by which time the global mobile infrastructure market will exceed $45.1 billion, as presented in the figure below.
“Throughout the world—from the developed economies of North America, Europe and North Asia, to the developing regions of Latin America, Africa and South Asia—carriers are seeing the value of upgrading their wireless networks,” said Dr. Jagdish Rebello, director, communications and consumer electronics, for IHS. “Despite significant economic headwinds, demand for higher data rates is compelling carriers to invest in new equipment, driving growth in infrastructure gear sales in 2011 and beyond.”
Moving to the Next Generation
The expansion of the wireless infrastructure market in 2011 is being fueled by carriers around the world investing in 3.5G/3.75G network upgrades, as well as the migration to 4G long term evolution (LTE) by some carriers in Europe, Japan, the United States and South Korea.
All of the carriers in the developed nations are focusing on investing in incremental network technology upgrades to 3.5G, 3.75G and 3.9G technologies. However, several carriers are going further and have commenced trials and are beginning to deploy and commercially operate 4G LTE networks.
Meanwhile, carriers in many of the emerging markets also are upgrading their 2.5G networks to 3.5G technologies and offering new data-centric services to customers. To be sure, carriers are not immune to the global economic downturn in the emerging markets of Latin America, South Asia and Africa, and the pace of investments in networking infrastructure has been slower than in previous years. But as data traffic has grown on their networks, many carriers have started to roll out 3G/3.5G networks. IHS expects that carriers in these regions of the world will move to transition their networks to 3.75G/3.9G technologies during the next few years.
This strategy of incremental technology migration has helped carriers keep pace with the bandwidth growth on their networks, without requiring a widespread rollout to orthogonal frequency-division multiple access (OFDMA)based 4G LTE. In areas of high data traffic—driven by increased consumer usage of mobile broadband with smartphones, connected notebooks and tablets—carriers are investing in channel card upgrades, integrating more channel cards in existing base stations. They also are selectively deploying new 3.75G/3.9G base stations to support higher data through puts.
In most cases, carriers in the developed world have already built out their 3.5G networks—so investments in expanding geographic coverage have been minimal.
LTE on the Rise
While 3.5G/3.75G is still the dominant air interface technology in terms of the mobile infrastructure market, the market for 4G LTE mobile infrastructure is now gaining momentum. Beginning in the second half of 2009, some of the wireless operators in Europe, North America, Japan and South Korea started to deploy 4G LTE. The deployments started to gather momentum in 2010 with approximately 160 mobile network operators (MNOs) announcing their intent to launch, trail, deploy or commercially operate LTE technologies by the end of the year.
To date, the number of carriers that are trialing, deploying or commercially operating 4G LTE networks has grown to slightly less than 200 operators globally. The majority of the early operator activity is concentrated in Europe and Asia-Pacific, followed by North America, Middle East/Africa and Latin America. In comparison, commercial deployments through 2011 have centered primarily in Europe, North America, South Korea and Japan. As operators accelerate their migration to 4G LTE, the wireless value chain is keeping in step, with 4G LTE device launches and chipset evolution accelerating as well.
IHS expects that LTE soon will be the dominant 4G technology. LTE offers operators the advantages of data rates of up to 100 Mbit/Sec., reduced latency, flexible bandwidth provisioning, increased cell capacity, flat IP-based network architecture, and reduced cost-per-data-bit transmitted. But LTE will require significant infrastructure capital investments, given that existing 3G base stations will not be compatible without LTE or if significant modifications are not made.
Global revenue in 2011 for 3G and 3.5G infrastructure gear will reach their peak in 2011. Beginning in 2012, factory revenue for 3G/3.5G wireless technologies will start to decline as carriers migrate to 4G LTE. IHS expects that starting in 2013, 4G will account for the largest portion of the global wireless infrastructure market, increasing to approximately $36.1 billion in 2015.
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