Blog: Are China bans fuelling Japanese vendor revival?

The 5G vendor landscape was shaping up to mirror that of LTE, with a handful of companies dominating the market, but all that changed earlier in the year with widening bans on Chinese gear forcing operators in many countries to urgently look for alternative suppliers.

In addition to a surge in trade restrictions on Chinese vendors, the move to open RAN, which makes networks more flexible, is creating opportunities for smaller companies which haven’t been able to build the scale to offer end-to-end network services.

Phil Marshall, chief research officer at Tolaga Research, told Mobile World Live (MWL) that in a market with three dominant 4G radio vendors, each with massive scale, it was virtually impossible for a small player to gain a meaningful footprint. With many tier-1 service providers under pressure not to use Chinese equipment, he said Japanese vendors and Samsung Networks in South Korea are looking to capitalise on a new environment where dominant player Huawei has been severely compromised.

He said while Japanese newcomer Rakuten Mobile certainly is changing the market with its open architecture push, he thinks the major contributor to the rise of smaller vendors is the restrictions on Chinese vendors.

Japan-based NEC and Samsung Networks, for example, were reportedly named by the UK government as potential alternative 5G suppliers after Huawei gear was banned [1] in July.

And it’s not just equipment suppliers looking to take advantage of both shifts.

Busy quarter
Japanese operator NTT announced in June it would invest JPY60 billion ($565.4 million) to take a near 5 per cent stake in NEC [2] and establish an alliance to jointly research and develop next-generation network technologies.

At the time, the companies said the initiative focused on enhancing Japan’s industrial competitiveness “and further ensuring safe and reliable communication infrastructure”.

NEC’s 5G business has been transformed since Rakuten Mobile selected it [3] as an equipment supplier in June 2019: the pair recently inked a deal covering the core network [4] and joint development of a standalone (SA) platform.

Japan Times reported the vendor is also planning a push in Australia, seeking to cash-in on a 5G R&D deal forged between the country and Japan in July.

In June, US-based satellite service provider Dish Network named Fujitsu [5] as an open RAN software and radio kit supplier.

Marc Einstein, chief analyst at Japan-based research company ITR, said it is “absolutely shocking” for Fujitsu or any Japanese network vendor to strike a deal overseas. The vendor had been stagnant in the telecoms market for several years, meaning it is likely not “making a large margin” from the Dish Network deal, he said.

Other signs of a resurgence for Japanese vendors include Hitachi Kokusai Electric working with Nokia to deploy local area 5G (using different spectrum than mobile operators) and private LTE services for industrial and government customers in Japan. And Mitsubishi Electric in May began testing a 5G system using the 28GHz band to connect its factory automation systems in Nagoya.

The recent rise comes after two decades of slow decline. Japanese vendors and operators pioneered the mobile internet, with NTT Docomo introducing i-mode in 1999.

“They were the kings, they ruled the roost. The market should have been all Japanese, but they totally lost it largely due to handset issues and partially [because] they didn’t know how to sell overseas. It was never because of the network,” Einstein said.

More competition
He explained open RAN is gaining traction as it gives mobile operators the option to buy different layers and components from a wider range of vendors, because everything is open and will be interoperable.

“You can now buy your security from one company, your network, management and monitoring system from another, and your virtual core from somebody else”.

“In the past, you would just buy everything from one or two vendors. For somebody like NEC, which doesn’t do end-to-end, this makes its potential addressable market many times bigger.”

He reckons this could be positive for operators, because they can play more vendors against each other. “Instead of just Nokia, Ericsson and Huawei bidding on something, an operator can have ten companies bidding, which should drive down prices. I think the economics and the dynamics of how networks are procured is completely going to change. I definitely think open RAN is here to stay.”

Marshall predicts open RAN will account for as much as 80 per cent of total RAN shipments in three-to-five years, but believes a similar percentage of open macro cells will use the same vendor for all active components: “I don’t see a lot of mixing and matching of active components in strategic sites, largely because of the loss in feature transparency”.

And while the evolution to SA reduces dependence on legacy kit, Marshall expects challenges for Japanese vendors because scale is more important.

“They need big infrastructure deals to achieve the necessary scale for longevity. The absence of Huawei in some major markets will help, but it will still be challenging for the Japanese vendors to compete with Ericsson and Nokia.”

Beyond 5G
Japan’s government is determined to catch up after missing out on the first wave of 5G, earmarking JPY220 billion to back private-sector R&D into 6G by various industries and academia.

In early August, it made moves to reduce its reliance on China as a manufacturing hub and to secure supply chains due to rising security concerns, allocating JPY70 billion to help about 90 companies move out of the country and back to Japan or Southeast Asia, Bloomberg reported.

The success of Japanese vendors moving forward appears, then, to be reliant on the speed with which they can transform their operations to cater to non-domestic customers; build the scale necessary to be competitive and profitable; grasp the opportunities of bans on larger rivals; and seize the day in terms of open RAN momentum.

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.

[1] https://www.mobileworldlive.com/featured-content/home-banner/rivals-circle-as-huawei-thrown-out-of-uk-5g
[2] https://www.mobileworldlive.com/asia/asia-news/ntt-takes-stakes-in-nec-to-push-5g-tech
[3] https://www.mobileworldlive.com/asia/asia-news/rakuten-mobile-forges-5g-deal-with-nec
[4] https://www.mobileworldlive.com/featured-content/home-banner/rakuten-looks-beyond-japan-with-fresh-nec-deal
[5] https://www.mobileworldlive.com/featured-content/top-three/dish-continues-5g-vendor-recruitment

\"IT電腦補習
立刻註冊及報名電腦補習課程吧!

Find A Teacher Form:
https://docs.google.com/forms/d/1vREBnX5n262umf4wU5U2pyTwvk9O-JrAgblA-wH9GFQ/viewform?edit_requested=true#responses

Email:
public1989two@gmail.com






www.itsec.hk
www.itsec.vip
www.itseceu.uk

Be the first to comment

Leave a Reply

Your email address will not be published.


*