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Following the profit warnings by network equipment providers during 2002, IDATE, a leading communications industry research and analysis firm, has chosen to update its world telecom equipment market forecasts for the period running from 2002–06. The highlights:

n In the mobile handsets market, due to the late introduction of innovative color displays/ polyphonic ringing tones/ GPRS handsets in the European market, the average handset price in the European market has been lower than estimated. As a result, average market volumes have been lower than expected, even though average volumes shipped by mobile handset equipment manufacturers have reached the 400-plus million figure (source: Nokia).

n In the fixed handsets market, the DECT market (the value-added part of the fixed market) and the phone/fax market have been significantly lower than expected. Again, due to a lower price per handset shipped, market volume has been much more limited than expected; the Taiwanese manufacturers’ market share has been larger than expected.

n In the LAN market, one anticipated a global economic trend that was based on a stagnation of IT budgets in the US market and a slowly decreasing trend in the European market. The contribution to the growth of Asian markets had been estimated as increasing by 15–20 percent, depending on the country in question. However, this has not been the case with the Chinese market, despite an increase. Consequently, LAN market volumes have been lower than expected, essentially in the US and in Europe.

n In the broadband switching markets, we had anticipated a more positive trend in the DSLAM market than previously. In most markets, the average number of cards shipped per rack has been lower than expecte. Prices per activated subscriber line are down by more than 20 percent as compared to previous deals.

n The WAN transmission market, even in radio microwave links, has been very limited in 2002. Most of the deals that appeared in the market were in telecom-developing countries, with significant price caps.

n The data switching market (which is basically the ATM, FR and X25 switching market, combined with the multi-service ATM&IP/MPLS market) has accordingly experienced lower sales than expected. This situation is due to bankruptcies affecting a number of long-distance data network operators, previously a traditional investment channel in the IP/MPLS high-end routing platforms. In the incumbent carrier markets, nearly all the core investments needed to ensure that previously separated data core networks converge, were carried out in 2000 and 2001. Over the course of 2002, the market was structured by densification in card capacities, which has generated a smaller market volume than previously anticipated.

n Mobile networking market estimates for 2002 have taken into account the revised shipment trends in the radio access networking market. Lower than expected shipments of both base stations and TRXs have been delayed to 2003 in many networks across Europe and the US. The Chinese markets, though very dynamic, have been mostly generating radio access deals for local network equipment manufacturers.

Thus, the world equipment market amounted to $268.3 billion in 2002, down by 9.87 percent compared to 2001. This market volume is lower than in 1996.

Given the events marking the last quarter of 2002, IDATE has revised its prospective market estimates for the period 2003–06 taking into account the following points:

n Very limited 3G CAPEX are expected to be spent on a yearly basis, by mobile network operators in Europe (following announcements by Deutsche Telecom, France Telecom, and KPN). IDATE’s previous quarterly update disclosed the capex impact of such possible announcements; its has now taken into account this very limited investment trend in its market estimates for 2003–06. In the meantime, there are no signs appearing in the market suggesting that investments in the 3G field other than European mobile network operators might change significantly. In the Chinese market, technological choices have not been made by network operators, nor has a specific rollout plan been fixed. In the CDMA market, the roadmap to CDMA 2000 is becoming progressively less clear, although IDATE anticipates CDMA EV-DV as being a key technology for the future.

n In the same vein, IDATE took into consideration the latest global economic trends, that affect the corporate data-related business, hence including LAN markets and to a certain extent data WAN equipment markets. The current economic trends remaining uncertain, it considers that the situation in the ‘corporate’-linked market, that is strongly dependant on the global economic situation, would remain quite flat, in terms of units, during year 2003 and year 2004. Though, taking into account stronger competition than before, one anticipated strong price decrease effects in these markets during years 2003 and 2004.

n In the handset market, the introduction of new handset manufacturers offerings, developed in Taiwan or in China, will have a correlative effect in price decreases. The ability of European handset manufacturers to counter this situation via the introduction of increasingly innovative products, as well as UMTS value-added handsets, will be limited considering the appeal of the customer-base for consumer-electronics such as handsets on the one hand and considering the delay in the development of UMTS on the other. In the meantime, the introduction of Microsoft-based solutions by the main mobile network operators might, as a consequence, have the impact of transferring intelligence from the network to the software in the handset.

Jean-Charles Doineau
head, TDS Department