Don’t bank on it. In three Q2 reports by Dell’Oro there is much talk of “cratering” and “worst for a decade”
Dell’Oro is not making happy ready for equipment vendors, although it does seem there might be light at the end of what has been a long tunnel in some areas at least.
Routers fall furthest
Firstly, routers for service providers fell by a stomach-dropping third (33%) in Q2 this year, which runs from April to the end of June, continuing a downward trend. “The service provider router market contracted for a fourth consecutive quarter due to customers pulling back on spending to lower equipment inventory,” said Jimmy Yu, VP at Dell’Oro.
The report identified Cisco, Huawei and Nokia as the three biggest players in this sector. Yu added, “The drop in quarterly revenue was one of the worst we have seen in this market for over a decade. The only silver lining to this quarter’s results is that we believe the inventory correction is nearly complete”.
The worst hit part of the sector was core routers which halved in value.
Cloudy for optical equipment
Secondly, the research house found that the global optical network equipment revenues fell 19% in Q2 compared to the same period last year. Network operators are still relying on what they have in stock rather than ordering more. Last year Dell’Oro reckoned this market sector was worth more than $4 billion in Q2 2023.
Yu predicts this situation will continue at least throughout Q3, commenting, “In the second quarter, nearly every region declined at a double-digit rate compared to 2Q 2023. This included a 15% decline in North America, 22% in Europe, and 28% in China to name a few.”
He is now predicting an overall shrinkage of 8% for the sector in 2024. Despite this, Cisco gained more than 1% market share in 2Q compared to Q2 last year while Huawei’s market share rose by almost 6%.
Mobile core falls too
Thirdly, Dell’Oro reported the value of the mobile core network (MCN) sector fell by 15% compared to Q2 2023. Dave Bolan, Research Director at Dell’Oro Group, stated, “We have entered unchartered territory, indicating that economic headwinds have a firm grip on the market. It also strongly suggests that mobile network operators (MNOs) have excess capacity to meet subscriber growth numbers.”
In this sector, the downturn in large part due to “the China region” which “dramatically impacted the MCN market’s lower Y/Y growth rate for the quarter,” Bolan adds. “The Europe, Middle East, and Africa (EMEA) and North American regions were also depressed but not nearly as low as China. Only the Asia Pacific region, excluding China, had a positive Y/Y growth rate.”
He also said that although new 5G Standalone (SA) networks were implemented in the quarter, “The market has slowed to the point that 2Q 2024 was the first quarter of the 5G era, with a negative growth rate Y/Y. To date…about 58 MNOs…have launched commercial 5G SA eMMB [enhanced mobile broadband] networks.”
“In 2022 there were 21 new 5G SA networks; in 2023, 13; and in the first half of 2024, three. As a result, we estimate that the MCN market will decline 11 percent Y/Y in 2024,” Bolan concluded.