Telecom industry adjusts to reinvigorated 5G and revised supply chain

In today’s current, complex macroeconomic conditions, the telecom industry is having to adjust at every level of the supply chain. At the same time, it is preparing to enter a second phase of the 5G lifecycle, with Fixed Wireless Access emerging as the first killer app and a true use case for mmWave.

Current conditions mean that the mobile telecom market is slowing. The short-term outlook is pessimistic although the infrastructure market is enjoying a surge from network deployments in India.

The telecom industry is looking for new areas of monetization such as Fixed Wireless Access (FWA), private networks, and the Internet of Things (IoT). All are expected to thrive thanks to 5G capabilities in both Sub 6 GHz and mmWave. The automotive market is also expected to be an interesting growth area toward the end of the decade.

This article, written by Cyril Buey, PhD., and and Amandine Pizzagalli, both from Yole Group use market trends and technology analyses performed by Yole Group’s teams from the RF Front-End for Mobile 2023 and RF for Fixed Wireless Access 2023 – Focus RF Front End reports.

The RF Front-End Market

As the market for RF Front End (RFFE) in mobile applications is stagnating, the industry is looking for new applications and a new business model to monetize 5G.

The stagnation is in stark contrast to 2021 where 5G RFFE was experiencing a boom as part of a post covid-19 recovery. It was not sustained. The mobile market decreased by almost 10% in 2022 and is not expected to grow in 2023. Contributing factors are that the penetration of 5G has been lower than expected, causing the growth in Bill of Materials (BoM) to stall, and resulting in a flat RFFE market by the end of 2022.

There has, however, been an increase in the BoM for smartphones, required to support new frequency bands and new features such as MIMO at uplink and downlink. It has also increased in response to the growing number of carrier aggregation combinations. In 2022, the smartphone market started to include satellite connectivity features, increasing the RFFE BoM.

The increasing capacity requirement, meanwhile, is responsible for driving Radio Access Network (RAN) investments. In 2022, the RAN market grew, largely as a result of higher 5G deployment in China and the long-awaited, and energetic, 5G deployment in India. These markets will create a boom in the RFFE market in 2023.

New Services

Rising inflation and the tight supply chain, mean that 5G RAN deployments are particularly expensive and they are not entirely supported by the consumer market which has been slow to adopt 5G. Consequently, Mobile Network Operators (MNO) need to find new applications to monetize 5G and to make their investments profitable.

In this context, MNOs are leveraging their network for new services such as FWA in both Sub-6GHz and millimeter wave (mmWave) spectrums. Indeed, FWA is gaining momentum thanks to 5G networks. It offers an easy, rapid and cost-effective solution for last-mile connectivity, compared to fiber. As a testimony to its popularity, FWA achieved 105 million subscriptions in 2022.  

Another area in which FWA is strong is Customer Premises Equipment (CPE). CPE designs are leveraging standard RFFE components from the smartphone industry with an architecture very close to smartphone designs. This sector is expected to exceed 30 million units in 2028, including more than the half with mmWave capabilities, for an overall RFFE market of $2 billion.

New Application Areas

The telecom industry is investing in new applications such as Augmented Reality/Virtual Reality (AR/VR), cloud gaming, IoT and automotive that could potentially drive the infrastructure market. Artificial Intelligence (AI) aims to be a key technology to develop these applications.

An increased use of cellular IoT is also expected in 2023. This will be driven by worldwide deployment, standalone 5G, and features like network slicing, which allows several different use cases to be addressed. The IoT market volume is expected to reach 900 million devices in 2026, representing a significant market opportunity for RF components – $860 million – that year.

At the system level, Original Equipment Manufacturers (OEMs), working with local MNOs, are turning toward new services. One example experiencing a boom is private networks. These are custom solutions in the industrial space. They offer high added value for MNOs as they focus on services rather than infrastructure equipment. Moreover, private networks are a suitable environment to test and develop emerging infrastructure solutions such as Open RAN or mmWave antennas.

The Ecosystem and Supply Chain

The RF component market has transitioned from devices to modules. There has also been a change in the types of modules used. Both factors have shaken up the ecosystem. Murata is one example of a company which has had to adapt to this transition, while the traditional Front-End Module (FEM) makers, e.g., Qorvo, took advantage of the situation.

The mobile market is still led by its traditional players. Qualcomm asserted its leadership, with its modem-to-antenna solution. The RF component industry is expected to propose FWA as a dedicated component in the coming years, which will present an interesting growth opportunity. Similarly, the IoT market is expected to enjoy a new and cheaper RF module offering by 2023, once the market is established. Leading figures, such as Qualcomm, Broadcom, Qorvo Skyworks or Murata, have many growth opportunities but these established companies are facing increasing competition from Chinese players.

During last two years, the Chinese RFFE ecosystem has accelerated. Fabless companies have increased market share, riding on the tailwinds of market expansion and the need for localization in the domestic market. The various emerging companies are experiencing double digit growth in the RFFE space and are actively supported by the Chinese ecosystem and demand for domestic alternatives. This is evidenced as more and more companies are going to IPO or entering Shanghai’s stock market, STAR, to increase their access to capital. Chinese RFFE companies will have an opportunity to increase market share in a very competitive environment. We expect there will be consolidation in order to expand and upgrade offerings. 

The Open RAN (O-RAN) business is also attracting many new players to the infrastructure market. Currently, O-RAN is a young market and needs to mature before it can offer equivalent, or better, performances than traditional RAN solutions. Nevertheless, it is opening up competition between equipment suppliers, driving the leading players to adjust and propose new services and solutions. Some major OEMs, such as Nokia, are betting on private networks to support growth in the coming year, while others, e.g. Samsung or NEC, are moving slowly toward O-RAN.

The diversification of the ecosystem is also impacting device makers who tend to propose highly integrated modules to new players in the market, to support development and to accelerate time to market. Device makers are also profiting from FWAs by applying higher Average Selling Prices (ASPs) on low volume RF components while providing proven technologies and devices for the mobile telecom sector.

The fact that FWA is expected to thrive thanks to the 5G mmWave spectrum has led to many companies developing mmWave beamformers and Antenna in Package (AiP) options in an attempt to capture a share of this growing market estimated to be worth $1 billion in 2028.

There are multiple uncertainties in the global economy which will impact the telecom industry. In addition to rising inflation and recovery from the global pandemic, the industry is assessing the second phase of 5G. In addition to economic pressures shaping the market, the smartphone industry is facing serious difficulties from reduced demand through to management of a complex supply chain. The industry is looking for new models, applications and verticals, which can deliver new business and growth opportunities.

About the authors

Cyril Buey, PhD., is a Technology and Market Analyst in Radio Frequency and Wireless Communication at Yole Intelligence, part of Yole Group. As a member of the Power & Wireless Division at Yole, Cyril is dedicated to the development of technology and market report in the field of telecommunication infrastructure and networks. Prior to Yole, Cyril worked at NSE as an Electronics Engineer, then he evolves on a project manager position to develop aeronautics and defense products. Cyril holds a master’s degree in Microelectronics, Nanotechnologies and Telecom from Lille University (France) and a PhD in Electronics, Antenna and Propagation from the University Nice Côte d’Azur (France).