Expecting Additional Orders Including US Year-End Frequency Auction
4th in Market Share... Aiming for Windfall from Anti-Huawei Sentiment
[Asia Economy Reporter Han Jinju] Samsung Electronics' large-scale 5G equipment contract with Verizon in the United States is interpreted as a signal of its full-scale dominance of the U.S. 5G market. Surpassing Nokia, the third-largest equipment company, is only a matter of time.
According to the industry on the 7th, the 3.5GHz band frequency auction in the U.S. was completed at the end of last month, and the 3.7~3.9GHz band frequency auction is scheduled for the end of the year. It is expected that telecom operators will begin selecting equipment suppliers in earnest immediately after the auction. The securities industry forecasts that 5G investments in the North American region will reach 360 trillion won from 2019 to 2025.
Surpassing Nokia... Samsung Electronics Eyes 3rd Place
According to market research firm Dell'Oro, Samsung Electronics' 5G communication equipment market share in the first quarter was 13.2%, up 2.8 percentage points from the previous quarter. Huawei (35.7%) maintained its lead as number one, but its growth was limited to 0.4 percentage points due to contracts with domestic companies. Samsung Electronics, which held fourth place following Ericsson (24.8%) and Nokia (15.8%), is expected to significantly increase its market share in the second half of the year.
A domestic telecommunications equipment industry official explained, "There are widespread talks that Nokia has lost trust among U.S. operators, and Samsung Electronics is expected to receive Nokia's volume as well," adding, "If Nokia's and Huawei's volumes are divided, more will go to Ericsson and Samsung, and Samsung Electronics' sales in the U.S. will increase significantly."
In May, the U.S. government expanded export restrictions to prevent Huawei from manufacturing semiconductors using U.S. technology or software, and the U.S. Federal Communications Commission designated Huawei as a national security threat. Nokia's poor performance amid the anti-Huawei sentiment is expected to bring a windfall to '5G Korea.'
The U.S. market accounts for 25% of global base station investments and is the world's largest mobile communication service market, worth $250 billion. Verizon, the number one operator in the U.S., has 183 million subscribers. Passing the technology and security verification of the largest U.S. telecom operator has increased the likelihood of additional orders.
Following the COVID-19 pandemic, 5G investments are expected to surge due to government stimulus measures and increased traffic. The importance and consumption of communication networks have grown daily due to increases in remote work, online shopping, and video viewing. According to Z Labs, compared to before COVID-19, video conferencing traffic increased by 218%, online education by 437%, and gaming by 2065%. Domestic and international investments are expected to continue expanding.
Growing Anti-Huawei Front... Positive Signals in Europe and India
By securing a 5G equipment and solution supply contract from Verizon, the number one U.S. telecom operator, positive signals have been lit for future global market orders in Europe, India, and elsewhere. As anti-Huawei sentiment spreads, the possibility of additional exports is increasing.
The United Kingdom banned new purchases of Huawei equipment starting in 2021 and announced plans to remove Huawei equipment from its 5G network by 2027. The UK's National Cyber Security Centre (NCSC) advised that it can no longer guarantee protection from risks posed by Huawei equipment, accelerating moves to exclude Huawei. The Indian government has also decided to restrict bids from Huawei and ZTE in the 5G network construction process. Following border clashes between India and China and deteriorating relations, India has joined the anti-Huawei measures alongside the UK and Australia.
Samsung Electronics has rapidly expanded its overseas order performance and market share by signing 5G supply contracts with Canada's Vid?otron in December last year, U.S. Cellular in February this year, New Zealand's Spark in March, and Canada's Telus in June. Samsung Electronics successfully launched the world's first commercial 5G service with the three domestic telecom operators in December 2018 and signed 5G supply contracts with Verizon, AT&T, and Sprint in the U.S. in 2018. In Japan, it started commercial 5G services with KDDI in March this year.
An industry official said, "Samsung Electronics is showing movements to expand equipment supply contracts in Europe and Canada, and there is no disagreement that Samsung will be spotlighted the moment Huawei is excluded."
Largest Domestic Telecommunications Equipment Contract... Achievement 20 Years After Entering the U.S. Market
Samsung Electronics announced that it signed a long-term network equipment supply contract worth 7.9 trillion won with Verizon on this day. The contract period is until 2025. This is the largest single export contract in the history of the domestic telecommunications equipment industry.
This contract is significant in that it has been recognized for reliability in both technology and security. Samsung Electronics develops and manufactures all key chipsets, including communication equipment and modems, in-house. By securing reliability in all areas of supply, manufacturing, and development, it minimizes risks in both supply chains and security. It has led 5G technology by successfully achieving the world's first commercial 5G launch with domestic telecom operators.
It is expected to fill the export gap caused by COVID-19 and contribute to expanding sales and job creation for small and medium-sized partner companies. Samsung Electronics collaborates with 86 domestic small and medium-sized equipment parts companies to manufacture network products. Samsung Electronics' 5G equipment has a high localization rate, with domestic parts accounting for 40-60%. As overseas orders expand, including the Verizon contract, it will help increase sales and job creation for domestic SMEs and create opportunities for mutual growth with them.
An industry official explained, "It can play a key role in revitalizing the sluggish domestic economy not only through increased investment, production, and employment in the telecommunications industry but also through expanded investment in related industries."
A Samsung Electronics official said, "Through this strategic long-term partnership, we will continue 5G innovation to provide enhanced mobile experiences to Verizon's customers."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
