Telecom Infrastructure Industry is in a Cyclical Lull; Is it a Secular Trend?

With the caveat that industry trends are one thing and individual company fortunes can diverge from the overall trends, Ericsson now says its total addressable market expected to grow by one to three percent in 2016 from 2018, despite expected decline in mobile infrastructure market by 2 to 6 percent in 2017.

Some softness in the mobile infrastructure market might well be expected, as operators largely complete their 4G upgrades, with a lull until the advent of mass market 5G upgrades.

So it is that Ericsson expects a decline in its networks business, with an addressable market of US$100 billion in 2016, with -2 to zero percent compound annual growth rates.

The information technology and cloud segment represents an addressable market of US$100 billion in 2016, with five percent to seven percent CAGR.

Media represents an addressable market of US$12 billion in 2016, with nine percent to 11 percent CAGR.

Still, networks represents 75 percent of total sales. IT and Cloud produces 20 percent of total net sales. Media drives five percent of sales.

That noted, it is not crazy to argue that markets are shrinking. Mobile and fixed network infrastructure is subject to the same performance-price trends that have affected other IT industries, ranging from PCs to smartphones to servers. Open source and “do it yourself” trends also mean users can create their own products at lower cost than buying from third parties.

Also, upstart providers are taking share, creating pricing pressure on infrastructure prices globally.

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