Samsung is making an equally spectacular and unexpected burst into the 5G race. Already present in the field through its chips and smartphones, the Korean electronics giant is propelling itself to the forefront of the battle for network equipment. A market held in 4G by four main equipment manufacturers in the world, two Europeans, Ericsson and Nokia, and two Chinese, Huawei and ZTE.
A $ 6.6 billion contract
Witness to its success, the mega 5G contract won with Verizon, one of the three largest US telecom operators alongside AT&T and T-Mobile US. It was proudly announced to investors on September 7, 2020. The amount reached $ 6.6 billion in five years, making Samsung one of the top three beneficiaries of Huawei's ban in the United States, alongside Ericsson and Nokia.
Until now, Samsung has been known more for its smartphones, a market it has dominated since 2011 according to Strategy Analytics, than for its mobile networking equipment. An area in which it was only a small fifth global supplier with only 3% of the market in 2017 according to the firm Omdia, far behind Huawei (28%), Ericsson (27%), Nokia (23%) and ZTE ( 13%). Verizon's mega-contract brings it to the forefront, making it appear as a major 5G OEM.
"VSsamsung has been working closely with Verizon for three years on many projects including interoperability of its equipment with those of Ericsson and Nokia, explains Stéphane Téral, telecoms equipment analyst at LightCounting, in the United States, to L’Usine Nouvelle.. All operators facing the possible replacement of Huawei have closely followed its course. And before Verizon, Samsung was a provider of Sprint now integrated with T-Mobile US. "
N ° 1 in 5G equipment?
Huawei's ban from 5G in North America, Australia, India, Japan and some European countries such as the United Kingdom opens up an unexpected development opportunity for Samsung. The geopolitical context makes it a major alternative to the large Chinese equipment manufacturer likely to compete for this role with Ericsson and Nokia, so far seen as the two big winners from the exclusion of Huawei.
And this can be seen in its discreet but certain rise in the market. From 3% in 2017, its share in the mobile network equipment market climbed to 5% in 2018 and then to 10% in 2019 according to Omdia. Its progress in 5G, which still represents only a small part of the investments of telecom operators, promises to be meteoric. According to figures from Dell'Oro, quoted by the South Korean newspaper Business Korea, the Korean group is leading with 37% of this market segment in six months, from October 2019 to March 2020, ahead of Huawei (28 %), Ericsson (27%) and Nokia (8%). A real earthquake!
These figures are worrying for the future of Ericsson and Nokia, but Stéphane Téral does not share. "We saw a surge of Samsung last year when China didn't start rolling out 5G, he admits. If you remove China where the volumes are huge, indeed Samsung can end up number 2, behind Ericsson and Nokia. But the second quarter of 2020 was an extraordinary one in China, which allowed Huawei and ZTE to increase their market share. So Samsung fell back to fifth place behind Huawei, Ericsson, ZTE and Nokia according to our ranking. "
Objective: 20% of the market in 2020
Unlike Huawei, Ericsson and Nokia, Samsung refuses to participate in the battle for 5G contracts. But it would have around fifty contracts with the potential to supply a dozen telecom operators in Europe, including Hutchinson 3 UK, in the United Kingdom, according to the analyst from LightCounting. It does not hide its ambition to take 20% of the global market for mobile network equipment in 2020, which would amount to doubling its footprint on this strategic market compared to 2019.
Faced with this offensive, Nokia appears to be the most threatened equipment manufacturer. It was at its expense that the Verizon contract was won by Samsung. Could it be supplanted by the Korean giant in the 5G market? Stéphane Téral doesn't really believe it. "It would take a lot more than the contract with Verizon to win, he estimates. We do not know how many 5G contracts he has secured. But one thing is certain: it is much less than at Nokia. Certainly, Samsung is an ultra powerful group, well known and respected in the world. But it has the great weakness of never having given itself the necessary means to conquer the world through mobile networks. Maybe the contract with Verizon will awaken his ambitions and make him redouble his efforts. He has the means."At this stage, the Seoul group derives its revenues from 5G networks from a handful of telecom operators: the South Koreans KT, SK Telecom and LGU +, the Americans Verizon, T-Mobile US and AT&T, and the Japanese KDDI.
A competitor as formidable as Huawei
In its race, Samsung has one big advantage: vertical integration. It is present across the entire 5G value chain, from chips to networks to smartphones, which gives it an end-to-end view of the market. This is an essential advantage over Ericsson and Nokia, which have left the terminals and outsource the production of their chips. It benefits from the experience of South Korea, the first country in the world to have deployed 5G on a large scale, since April 2019.
In the past, the Korean group has demonstrated its ability to succeed almost all its bets to become world number one. This is true in memory chips in 1992, television in 2006, flat screens in 2001 or even smartphones in 2011. Will he be able to do the same in mobile networks thanks to the switch to 5G? ? In any case, Ericsson and Nokia are warned. They'll have to face a powerful emerging competitor, perhaps just as formidable as Huawei.
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