According to the Q4 2016 Mobile Infrastructure Quarterly Market Tracker by IHS (News - Alert), 2016 will be the first year of decline of 2G/3G/4G macrocell deployments. This is being driven by the shift from hardware to software in the mobile infrastructure market. Just as software defined networking and network function virtualization have affected the hardware market for network and data center operators, the same is taking place in the mobile infrastructure market. Mobile operators are having to adapt to a new environment in which next generation communications are being deployed by companies other than traditional telecom service providers.
The report by IHS indicated the downward trend in the mobile infrastructure market is a global phenomenon that is affecting all the regions of the world. The 11 percent fall has brought the market value to $10 billion from the previous year. According to the firm, the market has entered the post?Long Term Evolution (LTE (News - Alert)) peak era as most of the developed world has already deployed the infrastructure to deliver LTE. The remaining markets will eventually follow, but they are in developing countries.
The different segments in the mobile infrastructure market are all down, even though some fared better than others. The only bright spot according to IHS was LTE, which 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. On the other hand, 2G/3G was down 20 percent year-over-year and 11 percent sequentially, its only bright spot being Japan's wideband code division multiple access (W-CDMA) deployment.
In terms of vendors, Ericsson (News - Alert) lost its lead to Huawei for macro 2G/3G/LTE radio, followed by a close third by Nokia. As for LTE, Nokia is in the lead, controlling 34 percent of the market, followed by Huawei (News - Alert).
On the software side of the technology, revenue was up 17 percent, which was driven by LTE-Advanced (LTE-A) upgrades that account for the bulk of fast-growing software revenue. For next generation communications companies, this will continue to be a growth segment as IHS reported it will grow at a five year compound annual growth rate (CAGR) of 9 percent, surpassing $23 billion by 2020.
The entire mobile equipment market will be supported by software until 5G deployments begin, which will once again drive growth just as 4G and LTE did the same for 3G. And once 5G comes online, it will be next generation communications solutions that will drive the Internet of Things (IoT), hosted services, gaming, streaming video and AI, placing more emphasis on software instead of hardware.
Edited by Alicia Young