Tuesday, April 16, 2024
Homenew-magEquipment suppliers note slowdown in 5G rollout

Equipment suppliers note slowdown in 5G rollout

Consumers anticipating the enhanced speeds that 5G wireless networks are promising might have to wait a little bit longer. According to The Wall Street Journal, 5G wireless network deployment has hit a slow patch. The delay is hurting sales for network equipment manufacturers and keeping access to faster download speeds and lower latency away from customers.

Less investments, opposition factors for 5G slowdown

Scaled back investments

Industry officials said they have not seen a common reason why the 5G slowdown has occurred in several markets. However, there are instances where telecom providers want guarantees that their investments will garner returns before they put more money into additional infrastructure, according to equipment makers. The investments needed to deploy 5G cellular networks are substantial because of how the systems work. For instance, 5G networks need more base stations and local relay points than standard communications infrastructure does to connect devices to the network in order to cover a city.

Research firm Gartner Inc. estimated that companies spent more than $2 billion on 5G wireless infrastructure in 2019—three times more than the spending in 2018, according to The Wall Street Journal. However, the spending is expected to slow down some this year, hitting about $4 billion. Meanwhile, operators that made big investments in 5G in South Korea during the first half of 2019 have recently scaled back, according to Needham & Co. analyst Quinn Bolton. Samsung, which makes gears for South Korean 5G networks, said its domestic 5G business would drop in 2020—but grow elsewhere.


The 5G deployment in the United States has slowed down in part because some towns are against how many antennas have to be installed to bring 5G to customers, according to industry executives. There are towns that have banned antennas in residential areas and The Wall Street Journal recently reported that a group of cities are suing the Federal Communications Commission (FCC) over its requirement that cities must decide on 5G antenna approvals within 60 or 90 days.

The lawsuit against the T-Mobile-Sprint merger slowed down 5G spending, too. The carriers agreed to merger almost two years ago, but the deal was only approved in federal court last week. T-Mobile and Sprint faced opposition from a group of state attorneys general who felt the $26 billion merger would deplete competitive balance and drive up customers’ prices.

While the carriers waited for a ruling, T-Mobile let contractors know that new work orders were postponed, according to people familiar with the matter. T-Mobile COO Michael Sievert told The Wall Street Journal that engineers went over budget last year, but the carrier would pick up investments again during the beginning of 2020.

New Street Research analyst Pierre Ferragu said the merger would speed 5G development in the U.S. and called it, “positive for equipment vendors.”

However, networking equipment manufacturers are still waiting for the spending to ramp up again—benefiting from 5G might have to wait another year or two, according to Juniper Networks CFO Ken Miller.
“I think it’s going to be a little slower and a little longer spending cycle than maybe people predicted a year or two ago,” Miller told The Wall Street Journal.

Companies anxiously wait for the 5G network rollouts to speed back up

A number of companies that are connected to the 5G deployment have seen a drop in sales. San Jose, CA-based chip maker Xilinks, Inc. decreased its sales growth outlook and cut its workforce by 7 percent due to the United States’ trade restrictions with China and slower 5G projections. According to company CEO Victor Peng, a lot of telecom operators that spent heavily to get initial 5G networks going are waiting to see if that investment creates expected returns before they put any more money into infrastructure.

Ericsson said it has experienced higher 5G costs and pointed to the T-Mobile-Sprint merger delay as the reason for the 5G slowdown. CEO Börje Ekholm also noted concerns surrounding Huawei Technologies Co.’s equipment has impacted 5G deployments.

Although equipment sales have slowed, executives are optimistic about 5G’s long-term prospects. Gartner predicts that 221 million 5G smartphones will be sold in 2020, according to The Wall Street Journal. Samsung recently announced three new 5G-enabled Galaxy S phones. The slow down has not impacted carriers’ efforts, either. AT&T CEO Randall Stephenson said last month the carrier’s 5G network covered 50 million people and is projected to reach the entire U.S in the second quarter. Meanwhile Verizon Chief Executive Hans Vestberg said his company is, “not slowing down.”

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