Delays in deploying third-generation networks combined with an overall slow economy helped create a 12-percent drop in demand for wireless equipment last year, according to a new report from the Gartner Group, a research and analyst company.
But the fourth quarter witnessed an upturn in demand, a trend confirmed by a series of contract announcements in the first quarter of this year, according to Jason Chapman, principal analyst with Gartner and author of the study.
“The positive results in the first quarter are encouraging signs for 2004,” he said, adding that he anticipates a single-digit growth for this year.
The study highlighted German vendor Siemens AG as the top beneficiary from last year’s contracts, as it ramped up its market share to 13 percent worldwide. This performance brings Siemens to within 1 percent of Nokia Corp., which still maintains its second position in world ranking.
Swedish player L.M. Ericsson still maintained its premier position, although its market share slipped by three points, according to the report. Motorola retained its fourth position, Nortel its fifth and Lucent sixth.
“Mobile network operators spent even less in 2003 than in 2002, and investments in radio access, switching, applications and core infrastructure for mobile totalled $40 billion, down from $45 billion in 2002,” said Chapman.
For the year, the seven top mobile infrastructure vendors racked up 267 contracts, 64 percent of which were for GSM technology, 14 percent for CDMA and 14 percent for third-generation W-CDMA.
Siemens glowed over the report. “Since the year 2000, we’ve nearly doubled our market share in mobile communication networks,” said Lothar Pauly, a member of the Siemens mobile group board. “Our objective is to continue to grow faster than the market and expand our position of leadership in 3G/UMTS.”
Chapman said Nokia improved its margins during the year. However, he attributed Siemens’ strong performance to GSM contracts in Eastern Europe and what is generally termed “emerging markets,” including some countries in Asia Pacific, Middle East and Africa. Siemens claimed 12 of the 22 3G launches last year.
Like Nokia, Siemens has little stake in CDMA technology, and its Eastern European gains were for GSM technology, in spite of the regional trend toward CDMA 450 MHz technology with the allocation of several CDMA 450 MHz licenses by the region’s local governments. Yet, according to Chapman, Siemens won sizeable contracts in countries in the region.
He ascribed Ericsson’s drop in market share to the struggles by its major customers, mostly European players, with debts incurred in acquiring licenses. The company still commands a 26-percent market share. He noted, however, that the figures in the fourth quarter represent an upswing for the Swedish company.
He also said Ericsson has yet to see improvements in its CDMA business, attributing the slow uptake to technology changes in its radio access equipment in which the company has bundled its CDMA and W-CDMA base station to position itself for the 3G market. When Verizon Wireless announced major contracts early this year, Ericsson lost to both Lucent Technologies Inc. and Nortel Networks Ltd.
Nokia also made marginal gains, he said, in spite of “teething problems” in its radio equipment, which the company had to fine tune for the W-CDMA market. Speculation rose last year that the Finnish company planned to sell its network business. But the rumors have mostly subsided this year.
Chapman said two things surprised him about the study. The first was that the market dropped only 12 percent, an indication of the industry’s resilience. The second was relatively low-key performance from emerging players like LG Electronics, Huawei Corp. and Panasonic.
“These guys were making a lot of noise about ramping up their positions last year,” he said, noting that unlike in the handset business, “it takes a while to build up credibility in network equipment.”
