The Global Telecom Equipment Industry (December 2021)

The Global Telecom
Equipment Industry
Market analysis – 2021-2040 Trends -

Stakeholder strategies
Date of publication December 2021
Main contributors Lauric Berthier and Flavien Vottero
Report code 21WXEEE03
XERFI 13-15 rue de Calais, 75009 Paris, France Tél. : +33 1 53 21 81 51 Fax : +33 1 42 81 42 14 E-mail : etudes@xerfi.com Site web : www.xerfi.com (catalogue complet)
The 5 phases of Xerfi Global’s Global Markets and Competition reports
Identification of the playing field
At Xerfi Global, we believe that international classifications are not the only valid definition of a market. It
is the companies that make the sector and not vice-versa. During our first brainstorming session, we strive
to give a clear-cut definition of the scope of the report.
Identification of market leaders

During the second phase, Xerfi Global’s analysts identify the companies who will be studied in the report.
Our aim is not only to classify by total sales, but also to detect tomorrow’s movers and shakers, especially
those from emerging markets.
Identification of the main market indicators

Using the best and most up to date international sources, Xerfi Global’s experts handpick the most
relevant indicators pertaining to both supply and demand.
Identification of corporate strategies

During a further brainstorming session, the Xerfi Global team aims to decipher the main corporate
strategies and key future trends.
Identification of the key conclusions

Thanks to a final brainstorming session, drawing on the knowledge of all the members of Xerfi Global, the
main conclusions are debated and ultimately summed up in no more than a dozen slides. Concision,
precision and accurate forecasts are our main aims.
This is a collective report written Other contributors include: Gabriel Giraud

under the supervision of: Flavien Vorttero
Lauric Berthier
The Global Telecom Equipment Industry - December 2021 2

Table of contents
1. Conclusions 5
1.1. Summary 6
1.2. Key slides 7
2. Market fundamentals 19
2.1. Scope of the report 20
2.2. Overview 21
2.3. Fundamentals of the fast-food industry 22
3. The market and leaders' activity 27

3.1. Sectoral environment 28
• Overview (PESTEL analysis) 29
• Economic factors 30
• The role of public authorities 32
• Technology 34
• Social trends 37
3.2. The global telecom equipment market 41

• Internet usage and dissemination 42
• Key market indicators 45
• Data by geographical markets 51
3.3. Leaders' activity and performances 57

• Revenue 58
• Operating profit rate 60
• Individualised activity and performances 62

Table of contents
4. Competition and leaders' strategies 65

4.1. Competitive environment 66
• Porter's 5 forces (Overview) 66
• Intra-sectoral competition 67
• Threat of new entrants 69
• Government's influence 70
• Bargaining power of customers 72
4.2. Leaders' strategies 76

• Overview 76
• R&D investments 77
• R&D partnerships with telecom operators 79
• R&D partnerships between competitors 80
• The race for innovation in 5G 81
• Monetisation of patent portfolios 83
• Development of a turnkey offer 84
• The rise of software solutions 86
• Integration of artificial intelligence 88
• Diversification into the Internet of Things (IoT) 89
• External growth 90
5. Sources 92
6. Annexes 96

1. Conclusions

1.1. Summary
Main trends 2021-2025
• Despite the health crisis global revenue for telecoms equipment and related services grew in 2020, to €190bn. Investments
by telecom operators and local authorities to increase connectivity in the territories supported demand. Lockdowns
increased the expectations and needs of households, businesses and administrations in terms of Internet speed, as a large
part of private life (consumption, entertainment, social links, etc.) and professional activities (meetings, business
appointments, teleworking, etc.) have been "deported" to the Web. The acceleration of 5G network deployment was also a
driver and will continue to fuel the growth of the telecom equipment industry in the coming years. Indeed, between 2021
and 2025, telecom operators will invest €800bn in infrastructure, 80% of which will be in 5G.
• However, not all the lights are on for telecom equipment manufacturers. The standardisation of the offer and the
multiplication of network sharing agreements between operators restrict their negotiating power and weigh on the demand
addressed to them.
• By 2025, 80% of the world's population will be using 4G and 5G mobile networks, up from 60% in 2020. This increase will be
fuelled by the modernisation of networks in emerging countries where mobile terminals are the main means of accessing
the Internet. At the same time, the industry will benefit from the democratisation of fixed networks, particularly fibre, in
European markets.
• Telecom operators are looking to enhance their networks with virtualisation and automation solutions. This trend changed
the business models of telecom equipment manufacturers, who are now seeking to offer turnkey packages that combine
hardware and software. In addition, very high speed networks (5G, fibre optics, etc.) are set to become more widely available
with the advent of connected objects in many industries. Telecommunications kit providers did set up innovation
ecosystems, teaming up with service providers and industrial customers (particularly in the automotive, energy and finance
sectors) to position themselves on these high-potential markets.

1.2. Key slides Main customers
The industry is mainly addressing telecom operators

Main customers of telecom equipment manufacturers (2020)
Unit: global market value in billion euros
Telecom equipment and related services

€190 billion
Operators are the main customers of

telecom equipment manufacturers.
The market for telecoms services rose
to €1,160bn in 2020, down only 2%
on 2019, despite the health crisis.
Other outlets for telecoms equipment
include media groups, data centres
and, to a lesser extent, industry Other industries :
(automotive, energy, etc.). Telecom services (operators)
Media (including
€1,160 billion OTT), data centres,
etc.
Xerfi processing / Sources: Orange and MTN Consulting

1.2. Key slides Telecoms operators' investments
Massive future investments in 5G

Investments by telecom operators over the period 2021-2025
Units: billion euros, % share
Of which 5G
350
300
250
200
150
97%
100
87%
89% 72%
50
63% 63%
0 34% 57%
North America China Europe Asia-Pacific Latin America MENA(*) Sub-Saharan CIS(**)
Africa
Source: GSMA
Between 2021 and 2025, telecoms operators will have invested nearly €800bn in network infrastructure, 80% of which will be in
5G. With connectivity set to play an even greater role in a post-pandemic world, operators' continued investment in advanced
networks, particularly 5G, and digital services will be crucial to keep up with and support the evolution of society in the future.
Telecoms equipment suppliers will therefore be heavily relied upon to equip new and existing infrastructure with high
performance equipment.

1.2. Key slides Mobile network coverage
Some regions are still lagging far behind in 4G deployment

Mobile network coverage by region in 2020
Unit: share in % of population covered
2G 3G 4G 5G
100%
12%
90%
29%
80% 42%
70% 56% 55%
69%
60%
85%
50%
82%
40%
30%
20%
10%
0%
Asia-Pacific China CIS(*) Europe Latin America MENA(**) North America Sub-Saharan
Africa
(*) Commonwealth of Independent States (Russia, Armenia, Belarus, Georgia, Kazakhstan, Moldova, Uzbekistan, Ukraine, Kyrgyzstan, Tajikistan and Turkmenistan)
(**) Middle East and North Africa
Source: GSMA

1.2. Key slides 5G coverage in 2025
5G coverage will be far from complete by 2025

5G network coverage in 2025 by region
Developed Asia-Pacific 53%
North America 51%
China 48%
By 2025, 21% of the world's
population should be covered by 5G. Europe 35%
It is mainly the mature countries that
will benefit from access to very high- World 21%
speed mobile broadband, particularly
the so-called "developed" Asia-Pacific Gulf States(*) 21%
(China, Japan, South Korea, etc.),
CIS 14%
North America and Europe.
In 2021, 160 5G networks were Latin America 10%
already operational in 62 countries.
Rest of Middle East 7%
Rest of Asia-Pacific 5%
Sub-Saharan Africa 3%
0% 10% 20% 30% 40% 50% 60%
(*) United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain
Source: GSMA

1.2. Key slides Mobile network subscriptions by region
North America to take the lead in 5G deployment

Subscriptions to 4G and 5G mobile subscriptions
Unit: % share of mobile subscriptions (excluding IoT)
NORTH AMERICA
EUROPE 60%
MENA(**)
90%
4G 5G
90%
4G 5G CIS(*) 40%
60% 60%
20%
40%
60% 0%
20%
2020 2025
30%
0%
30% 2020 2025
0%
2020 2025
0%
LATIN AMERICA
2020 2025
80%
ASIA-PACIFIC 60%
80% 40%
20% CHINA
AFRICA 60% 80%
0%
SUB-SAHARAN
30% AFRICA 2020 2025
40% 60%
20%
40%
10% 20%
20%
0%
0% 0%
2020 2025
2020 2025 2020 2025
Source: GSMA

1.2. Key slides Mobile data traffic
Mobile networks fuel connectivity growth

Global mobile data traffic (2015-2022f) Global data traffic in data centres (2015-2021st)
Unit: petabyte (10 15bytes) per month Unit: exabyte (1018 bytes) per month
90 000 25 000
80 000
20 000
70 000
60 000
15 000
50 000
40 000
10 000
30 000
20 000
5 000
10 000
0 0
2015 2022f 2015 2021e
Source: Cisco Source: Cisco

1.2. Key slides Intra-sectoral competition
Challengers have to join forces to compete with the five leaders

Market shares of telecom equipment suppliers (2020)
Unit: % share of market by value
In order to reduce the pressure on

prices, telecom equipment leaders
tended to consolidate in recent years,
such as Nokia's takeover of Siemens'
Network business in 2006 and Alcatel
in 2016. As a result, 4 major players
18%
dominate the telecom equipment Huawei
industry. Huawei, Ericsson, Nokia and 31%
ZTE accounted for 71% of the total Ericsson
value of the global telecom 2% Nokia
equipment market in 2020. 3%
ZTE
Faced with the power of these groups,
smaller players regularly choose to 6% Cisco
join forces in order to compete with Ciena
the leaders, particularly in terms of
technology. The rise of 5G tends to 10% Samsung
accelerate the race for technology Others
15%
and the number of alliances between
operators is increasing in order to 15%
limit the risks of producing offers that
are less competitive than that of the
competitors.
Source: Statista

1.2. Key slides Investment in R&D
6 telecom equipment industry players among the world's R&D top 50

World ranking of companies investing the most in R&D (2019)
Unit: million euros
1. Alphabet
2. Microsoft
3. Huawei
4. Samsung
5. Apple
6. Volkswagen
7. Facebook
8. Intel
9. Roche
10. Johnson & Johnson
20. Bosch
24. Cisco
30. Abbvie
31. Qualcomm
36. Nokia
40. Fiat Chrysler
48. Ericsson
50. Continental
0 5 000 10 000 15 000 20 000 25 000
Xerfi processing / Source: European Commission, The 2020 EU Industrial R&D Investment Scoreboard

1.2. Key slides Key performance indicators (1/3)
Huawei's competitors benefit from sanctions against the Chinese group

Key performance indicators and growth drivers of the world's leading telecom equipment manufacturers
CONSO- AVERAGE
CAGR EBIT RATE
COMPANY LIDATED EBIT RATE KEY DRIVERS OF GROWTH AND PROFIT
(2015-2020) (2020)
SALES (2020) (2015-2020)
•Ericsson's consolidated revenues grew by 2.3% in 2020, thanks to

market share gains in the United States, China, Japan and Europe in its
networking business. The group benefited in particular from the
ERICSSON 22 157 M€ -1.2% 12.0% 2.4% sanctions imposed on Huawei in certain countries.
•The EBIT rate went up despite increased R&D spending on equipment
and 5G technology.
•In 2020, revenue grew by 3.8% after 5 years of strong growth (14.5%
CAGR between 2015 and 2020) thanks to the dynamism of its
HUAWEI 113 249 M€ +17.7% 8.1% 9.4% smartphone sales and 5G equipment business in China.
•The EBIT rate deteriorated slightly in 2020 (8.1%) as a result of increased
investment in R&D and stock building.
•Revenue increased by 11.8% in 2020 thanks to its activities on the

Chinese market in telephone infrastructure and services.
ZTE 12 889 M€ +0.3% 5.4% 3.5% •The EBIT rate increased to 5.4% despite higher raw material costs and
R&D expenses in 2020.
•Nokia's revenue fell by 6.3% in 2020, weighed down in particular by the

Networks division. However, the decline was limited by an increase in
NOKIA 21 852 M€ +11.7% 4.0% 1.5% intra-group trade.
•EBIT rate to double by 2020 due to lower R&D and SG&A costs.
Ranking by EBIT rate / Xerfi processing / Sources: operators and trade press

1.2. Key slides Key performance indicators (2/3)
Telecom network specialists outperform

CONSO- AVERAGE
CAGR EBIT RATE
(2015-2020) (2020)
SALES (2020) (2015-2020)
•Sales rose sharply in 2020/2021 thanks in particular to the comparison

effect with the previous financial year and the surge in sales of 5G
QUALCOMM 28 072 M€ +7.3% 29.2% 22.4% equipment.
(09/2021)
•Strong increase in EBIT driven by strong sales and good control of the
cost structure.
•Cisco's revenue rose again in the last financial year (+1%). The group
notably benefited from the increase in customer investments in
CISCO 41 641 M€ +0.2% 25.8% 26.1% digitalisation and the cloud following the Covid-19 pandemic.
(07/2021)
•Decrease in EBIT rate due to significant restructuring costs incurred in
the last two years.
•Ciena's consolidated revenues declined by 1.1% in 2020. This decline

was mainly attributable to the Networking Platforms division.
3 137 M€ •Record EBIT rate thanks to lower operating expenses and a sales
CIENA +7.6% 13.8% 8.5%
(10/2020) momentum boosted by the pandemic. The group also suspended its
share buyback programme at the beginning of the year at the height of
the health uncertainties, reducing expenses.

1.2. Key slides Key Performance Indicators (3/3)
Japanese players dependent on the dynamics of the Japanese market

CONSOLIDAT AVERAGE
CAGR EBIT RATE
ACTORS ED AC EBIT RATE KEY DRIVERS OF GROWTH AND PROFIT
(2015-2020) (2020)
(2020) (2015-2020)
•Revenue in 2020 increased by 2.8% compared to 2019 thanks to strong

sales in Q4.e
SAMSUNG 176 051 M€ +3,4% 15,2% 17,1% •The EBIT rate was slightly down on the average rate for the period
(15.2%) despite the implementation of a cost reduction strategy.
•Group revenue fell by 6.9%, despite an increase in the network business

focused on 5G base stations and continued high demand for electronic
components (especially semiconductors).
•The closure of the Mie semiconductor plant (in Japan) and the group's
29 023 M€ withdrawal from European markets with low profitability weighed on
FUJITSU -5,4% 7,4% 4,5%
(03/2021) revenues.
•Improvement of the EBIT rate thanks, among other things, to the
disposal of some unprofitable activities, the reduction of expenses
related to the change of the Group's business model and the closure of a
production site in Augsburg (Germany).
•The group's consolidated revenues decreased by 3.3% in FY 2020/2021.

The Network Services and Public Infrastructures businesses performed
well but were unable to offset the decline in revenues in the other
NEC 24 207 M€ +1,2% 5,1% 3,1% segments.
(03/2021)
•Increase in the EBIT rate mainly due to the discontinuation of
unprofitable activities, the sale of land and capital gains on the sale of
subsidiaries.

1.2. Key slides Overview of leaders' strategies
The race for technology rages on in telecom equipment

Development areas of the world's leading telecom equipment manufacturers
• Focus on new network technologies

• Develop solutions adapted to the increasing
INNOVATION STRATEGIES complexity of networks (automation, etc.)
• Provide turnkey offers
OF LEADING
TELECOM • Position on the downstream side of the
DIVERSIFICATION value chain (digital services, IoT, etc.)
EQUIPMENT • Expand internationally
MANU-
FACTURERS • Develop expertise through partnerships
• Investing in start-ups
EXTERNAL GROWTH • Acquire companies with differentiating know-how
and/or positioned on a targeted market
These objectives are supported by measures to improve operational efficiency and

streamline the portfolio in line with market trends.
Source: Xerfi

2. Market fundamentals

2.1. Scope of the report
Operators offer a wide range of equipment and associated services
The telecom equipment market covers fixed and mobile communication networks and the development,
design and deployment of associated equipment, as well as the provision of services (maintenance, upgrades,
etc.) and solutions (automation, optimisation software). This market can be divided into several segments:
A report focused on Mobile RAN (radio access network), fibre optics, broadband, wireless networks, IP telephony, wireless core
on telecom infrastructure network, as well as SP (service provider) router and Ethernet switch segments.
Smartphones are excluded from the scope.
The main customers of telecom equipment manufacturers are operators, companies and local
authorities/administrations (smart cities).
The scope of the market gradually expanded beyond the deployment of telecom infrastructure wires and
cabinets to IT services due to the increased complexity of networks, which requires the integration of
software solutions for network automation and management. Major telecom equipment suppliers also
An expanding business
implemented themselves on fields that have emerged as a result of faster networks, such as data analytics
scope and the Internet of Things. With this diversification, telecom equipment providers are becoming more like IT
service companies. The major difference, however, is that the former are still primarily serving the needs of
telecom service providers.
While the majority of emerging economies continue to focus on 4G expansion, in Europe, China and other
Investment in 5G is taking
advanced economies, the deployment of 5G mobile networks is accelerating. To date, approximately 160 5G
off around the world networks have been deployed in 62 countries.
Source: Xerfi

2.2. Overview Key industry figures
The rollout of 5G accelerates growth by 2025 and will boost it further
€190 billion This is the value of the global market for telecom equipment and related services in 2020.
This is the amount telecom operators will invest in infrastructure over the period 2021-2025, 80% of which
€800 billion will be devoted to 5G.
160 This is the number of commercial 5G networks deployed and operational by 2021, in a total of 62 countries.
This is Huawei's market share in the telecom equipment market in 2020. The Chinese group is ahead of Nokia
31% and Ericsson (15% each) and ZTE (10%).
8% This is the proportion of the world's population that is not covered by a mobile telecom network.
Source: Xerfi, according to operators and the specialist press

2.3. Market fundamentals The simplified telecom equipment value chain
Operators are focused on innovation and marketing

Simplified value chain of the telecom equipment industry
Operators outsource
production and focus on
assembly
Manu- Sales and

R&D Design
facturing Marketing
Network services
• Network deployment, upgrade and maintenance;
• Systems integration, planning and network optimisation ;
• Managed services: hosting, outsourcing, predictive analysis, etc.
Automation and analysis solutions

• Cloud-based applications and platforms (orchestration, virtualisation, IMS, VoLTE, etc.) ;
• Network management (OSS, SON, etc.) ;
• Software: analytics, cloud stack, security, IoT, media/video, etc.
Source: Xerfi

2.3. Market fundamentals Main products
The market can be divided into 6 main product categories

Main categories of telecom equipment and related technologies
TELECOM EQUIPMENT TECHNOLOGIES/EXAMPLES
• Cable
Broadband access • DSL (Digital Subscriber Line)
• PON (Passive Optical Network)
• Main market for circuit switches: software, media gateway, etc.

IP telephony • Main IMS (IP Multimedia System) market: voice server, etc.
(voice over IP or VoIP) • Mobile switching centres
Radio relay
Point-to-point radio relay
and mobile backhaul
• 5G new radio (NR), Sub-6GHz, millimetre wave

Mobile radio access network
• LTE, LTE TDD, LTE FDD
(RAN) • Smart antennas (massive MIMO)
Wavelength division multiplexer, multi-service multiplexer, optical switch, optical

Optical transport network packet platforms, data centre interconnection, etc.
Ethernet Switches • Enterprises: high-end routers, access routers (mid-range and low-end)
and routers • Service providers: core routers, edge routers, carrier Ethernet switches
Source: Xerfi

2.3. Market fundamentals Main customers
The industry is mainly addressing telecom operators

Main customers of telecom equipment manufacturers (2020)
Unit: global market value in billion euros
Telecom equipment and related services

€190 billion
Operators are the main customers of

telecom equipment manufacturers.
The market for telecoms services rose
to €1,160bn in 2020, down only 2%
on 2019, despite the health crisis.
Other outlets for telecoms equipment
include media groups, data centres
and, to a lesser extent, industry Other industries :
(automotive, energy, etc.). Telecom services (operators)
Media (including
€1,160 billion OTT), data centres,
etc.
Xerfi processing / Sources: Orange and MTN Consulting

2.3. Market fundamentals Main operators
Huawei, world leader in telecom equipment

Overview of the global telecom equipment leaders analysed in this report
CONSOLIDATED
COMPANY COUNTRY THE GROUP'S CORE BUSINESS
SALES (YEAR)
113 249 M€
HUAWEI (2020)
Telecom equipment (devices and infrastructure) and services
21 852 M€
NOKIA (2020)
Telecom equipment (infrastructure) and services
22 157 M€
ERICSSON (2020)
12 889 M€
ZTE (2020)
41 641 M€
CISCO (07/2021)
Network infrastructure and services
3 137 M€
CIENA (10/2020)
Network infrastructure and services
176 051 M€
SAMSUNG (2020)
Electronic products
29 023 M€
FUJITSU (03/2021)
IT services, Telecom equipment
24 207 M€
NEC (03/2021)
IT services, Telecom equipment
28 072 M€
QUALCOMM (09/2021)
Source: Xerfi, based on operators and trade press

2.3. Market fundamentals Mobile network subscriptions by region
North America to take the lead in 5G deployment

Subscriptions to 4G and 5G mobile subscriptions
Unit: % share of mobile subscriptions (excluding IoT)
NORTH AMERICA
EUROPE 60%
MENA(**)
90%
4G 5G
90%
4G 5G
60%
CIS(*) 40%
60%
20%
40%
60% 0%
20%
2020 2025
30%
0%
30% 2020 2025
0%
2020 2025
0%
LATIN AMERICA
2020 2025
80%
ASIA-PACIFIC 60%
80% 40%
20% CHINA
AFRICA 60% 80%
0%
SUB-SAHARAN
30% AFRICA 2020 2025
40% 60%
20%
40%
10% 20%
20%
0%
0% 0%
2020 2025
2020 2025 2020 2025
Source: GSMA

3. The market and
leaders' activity

3.1. Sectoral
environment

3.1.1. Overview PESTEL analysis
A generally favourable environment for telecom equipment

PESTEL analysis of the global telecom equipment industry environment
POSITIVE NEGATIVE IMPACT
P
- Development of telecom infrastructure
OLITICAL
- Measures to promote digital access in
emerging markets
- Sanctions by the US and other countries
against some Chinese operators - +
E
- Increased needs and investments in
CONOMIC
broadband telecom infrastructure
- Digitalisation of the economy
Nothing to report - +
(e-business, etc.)
S
- Increasing interconnectivity between
OCIAL
people via smartphones in particular
(social networks, mobile games, etc.)
Nothing to report - +
T
- Democratisation of very high speed - Growing concerns about cybersecurity
ECHNOLOGICAL
broadband in emerging countries
- Deployment of 5G in mature economies
- Network sharing between operators
that limits infrastructure needs
- +
E COLOGIAL
Nothing to report Nothing to report - +
L
- Technology protection through - Expensive industrial property litigation
EGAL
intellectual property in
innovative industry
a highly - Numerous standards to be met for
telecom equipment
- +

3.1.2. Economic factors Macroeconomic environment (1/2)
Indicators above their pre-crisis level by the end of 2021

Global GDP and consumer spending (2009-2022f)
Unit: % of annual changes (at constant prices and exchange rates)
GDP Consumer spending
6,0%
4,0%
2,0%
0,0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e 2022p
-2,0%
-4,0%
Processing, estimation and forecasting Xerfi / Source: Feri
After a historic decline in 2020 (-3.8%), world GDP rebounded sharply in 2021 (+5.4%) thanks to dynamic growth in the United
States (stimulus plans announced by the Biden administration) and in East Asia (despite a slowdown in China). Assuming a
normalisation of the health situation, growth will remain strong in 2022 (+3.8%), due to a favourable comparison effect with the
lockdown periods that disrupted the first half of 2021 (particularly in Europe, Brazil and India). The estimated rebound in 2021
and 2022 will bring the global economy back above its pre-crisis level. With GDP recovering and economies in need of recovery,
government investment plans for telecoms infrastructure are likely to be revised upwards in the coming years. At the same time,
growth in consumer spending will lead to an increase in household budgets for telecoms services, benefiting demand for
telecoms equipment.

3.1.2. Economic factors Macroeconomic environment (2/2)
North America and Asia are the main drivers of the global economy
Global GDP and consumer spending by region (2012-2022f)
Unit: % of annual changes (at constant prices and exchange rates)
North America Western Europe Eastern Europe Asia Latin America

GDP GDP GDP
GDP GDP
Consumption Consumption Consumption
Consumption Consumption
8% 8% 8% 8%
8%
6% 6% 6% 6%
6%
4% 4% 4% 4%
4%
2% 2% 2% 2%
2%
0% 0% 0% 0% 0%
-2% -2% -2% -2% -2%
-4% -4% -4% -4% -4%
-6% -6% -6% -6% -6%
-8% -8% 2021e
-8% -8% -8%
2022p
2018
2019
2020
2012-2017
2018
2019
2020
2021e
2022p
2012-2017
2018
2019
2020
2021e
2022p
2012-2017
2021e
2018
2019
2020
2022p
2012-2017
2019
2021e
2018
2020
2022p
2012-2017
Processing, estimates and forecasts Xerfi / Source: Feri
The economic recovery has been particularly strong in North America and Asia. In the US, the stimulus packages of the
outgoing (Trump) and incoming (Biden) administrations are providing support and long-term stimulus prospects that are
boosting the US manufacturing base. In Asia, the almost complete continuation of the global health measures prolonged the
windfall effect on exports of medical and IT goods (two areas of specialisation in Asian industry). The first two regions will
experience a much greater slowdown in growth in 2022 than the more self-centred European economies.

3.1.3. The role of public authorities Government support schemes
States play a key role in the deployment of telecom networks

Examples of state policies to strengthen mobile infrastructure
In September 2016, the European

Between 2015 and 2020, the Chinese
Commission set targets for broadband
government invested more than €19bn
network coverage in Member States, in
to develop mobile broadband
line with its 'Digital Single Market'
infrastructure in underserved areas
strategy. By 2025, networks will have to
including 50,000 villages.
be upgraded to offer download speeds
of at least one GB per second to all
The plan was part of a wider investment
European households as well as full 5G
project to support China's digital
coverage in all urban areas and major
economy as a whole.
roads and railways.

3.1.3. The role of public authorities The level of Internet connectivity
Remote areas are not attractive enough for private operators

Evolution of global mobile internet connectivity (2014-2020)
Units: share in % of world population
By 2020, 4 billion people (51% of the Connected Connected non-user Not covered
world's population) were using the
100%
mobile Internet, while 3.4bn had 8% 7% 6%
15% 12%
access to the network but were not 19%
connected. The number of people 25%
subscribing to the mobile internet has 80%
been continuously increasing over the
44% 43%
past years and the share of the 46%
world's population excluded from the 46%
60% 46%
digital world has been shrinking. 450 45%
million people (mainly in rural areas of 43%
developing markets) were not
covered by a mobile network in 2020,
40%
compared to 1.8 billion in 2014. The
remaining connectivity gap cannot be
closed without government support. 49% 51%
Deploying telecoms networks in these 42% 46%
20% 39%
32% 36%
areas entails significant costs and
generates too few benefits for private
operators.
0%
2014 2015 2016 2017 2018 2019 2020
Source: GSMA, The State of Mobile Connectivity Report 2021

3.1.3. The role of public authorities Trade sanctions
Trade sanctions that disrupt both competition and the market
Trade tensions between the US and China resulted in the introduction and escalation of tariffs on a
number of products between the two countries from 2018. There have also been procurement bans.
At the end of 2019, China ordered its state-owned enterprises, for example, to stop buying US
agricultural products.
These tensions have not spared the technology sectors, particularly the telecom equipment industry.
The trade and technology war The United States banned sales of equipment, software and materials, including key semiconductor
components, to Chinese companies on national security grounds. Among the companies targeted
between the United States
are the giants Huawei and ZTE.
and China is weighing
The international development ambitions of these players are severely disrupted by these sanctions
on Chinese operators as they are no longer able to access certain key inputs and even markets. The Australian and New
Zealand governments, for example, followed US directives by preventing Huawei from supplying
certain products into their territories. As for ZTE, the group's longevity was threatened in 2018 when
the US government banned trade between the group and US companies due to alleged sales of
telecoms equipment to Iran. ZTE subsequently had to make a deal with the US authorities to avoid
bankruptcy.

3.1.4. The technology Major technological trends (1/2)
Growing need for high-speed connectivity

Key drivers of connectivity in the medium to long term
Smartphones are increasingly affordable and have become, over the years, the main
SMARTPHONES
electronic devices used to access the Internet.
The growth of connected objects implies a multiplication of data exchanges between the
INTERNET
sensors and the manager's database. A very high speed network is therefore necessary to
OBJECTS
ensure the smooth running of the system.
Global data centre traffic has been growing at a rapid pace for several years as the
demand for cloud services increased. Coupled with the virtualisation of data centres, this
DATA CENTRES / dynamic is driving connectivity requirements.
CLOUD The storage of data in the cloud by companies and individuals has become the norm, as
has the development and execution of applications. This requires high-speed connectivity
to function properly.
The Covid-19 crisis accelerated the democratisation of teleworking. The home office
TELESERVICE
involves allowing the worker to access the same tools and data remotely as in the office.
OTHER
Source: Xerfi

3.1.4. The technology Major technological trends (2/2)
The need for high-performance 5G networks
Fast and reliable telecommunications networks are the backbone of connected and automated
economies (including smart cities, autonomous vehicles and automated factories) and are generating
new revenue streams in many industries.
As industries become smarter through the adoption of cloud, AI, data analytics and edge computing,
5G rollout progresses in
next generation 5G networks will play a central role in supporting industrial automation.
mature economies
At the same time, the majority of emerging economies will continue to focus on 4G expansion in the
coming years, while in Europe, China and other advanced economies, the rollout of 5G mobile
networks will accelerate. To this date, approximately 160 5G networks have been deployed in 62
countries.
Billions of new machine-to-machine connections (in manufacturing, energy, etc.), enabled by greater
connectivity and constant exchanges over cloud environments, require the support of high-
performance networks. This opens up new opportunities for telecom equipment players to provide
5G is the cornerstone end-to-end offerings, including AI and analytics-based automation solutions, for smart, highly secure
of the industry of the future networks that are less expensive to maintain. The provision of end-to-end solutions has thus become
a key success factor in the telecom equipment industry. The appeal of 5G product offerings lies in
their combination with a rich software ecosystem that covers core network automation and adjacent
vertical applications.

3.1.5. Social trends Smartphone usage (1/4)
Mobile phone subscriptions exceeded 8 billion

Number of active mobile phone subscriptions (2007-2020)
Unit: million subscriptions
Emerging countries Mature countries
9 000
8 283 8 152
8 000
7 152
7 000
6 000
5 000
4 000
3 368
3 000
2 000
1 000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Xerfi processing / Source: ITU

Mobile phone penetration rate exceeds 100%.

Number of active mobile phone subscriptions (2007-2020)
Unit: subscriptions per 100 inhabitants
The global mobile penetration rate, Emerging countries Mature countries World
i.e. the percentage of the world's
population that owns a mobile phone, 160
surpassed the 100% mark since 2016.
The level of equipment is significantly 140
higher in mature economies (133.4%
in 2020) where each consumer has, on
120
average, more than one subscription.
This is due to the dual equipment for
personal and professional life. 100
Emerging countries have been flirting
with the 100% threshold since 2017 80
(99.3% in 2020).
As the smartphone market grows, so 60
does the number of broadband
subscriptions, which in turn increases
telecom operators' revenue. This 40
encourages telecom operators to
invest more in the expansion and 20
modernisation of network
infrastructure. 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: ITU

The share of smartphone users in emerging countries is increasing

Number of active smartphone users by region
Unit: million people
Asia-Pacific Middle East and Africa Europe Latin America North America
4 500
4 000 3 857
7,8%
3 500
3 181 9,2%
2 936
3 000 9,1% 12,6%
2 695
9,5% 9,1%
2 491
2 500 9,9% 8,8%
10,4% 14,3%
8,5% 16,8%
8,1% 17,6%
2 000 18,6%
19,4% 12,7%
12,4%
1 500 12,2%
11,2%
56,2%
1 000
51,7% 52,5%
50,8%
50,9%
500
0
2016 2017 2018 2019 … 2021e
Source : Newzoo

Emerging countries are catching up

Smartphone ownership by region in 2020 and 2025
Unit: share in % of population
Asia-Pacific China CIS Europe
2020
2025
Latin America Middle East and North Africa North America Sub-Saharan Africa
Source: GSMA

3.2. The global telecom
equipment market

3.2.1. Internet usage and dissemination Internet access around the world
The number of people using the Internet quadrupled in 15 years

Internet users worldwide (2005-2019)
Units: million people, % of annual changes, % penetration rate
Internet users (left scale) Annual variation (right scale) Internet global penetration rate (right scale)
4 000 60%
3 000 45%
2 000 30%
1 000 15%
0 0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Xerfi processing / Source: ITU (International Telecommunications Union)
The number of Internet users worldwide reached nearly 4 billion in 2019, almost four times the number in 2005, when the
global Internet user population was just over 1 billion. Over the past decade, this number grew by more than 8% per year on
average, driven mainly by the rapid increase in connectivity in Asia-Pacific and, to a lesser extent, in other emerging regions.
At the same time, global internet penetration increased from less than 17% in 2005 to 51.4% in 2019. As a result, telecoms
equipment manufacturers are increasingly being asked to deploy and upgrade infrastructure to improve connectivity for the
world's population.

3.2.1. Internet usage and dissemination Mobile data traffic (1/2)
Emerging countries to catch up with mature economies by 2026

Mobile data traffic by region (2020-2026)
Unit: GB per month
2020 2026
China
India
North America
Western Europe
North East Asia
World 9,0
35,0
Rest of Europe
MENA(*)
Asia-Pacific
Latin America
Sub-Saharan Africa
0 10 20 30 40 50 60
(*) Middle East and North Africa / Source: Ericsson

3.2.1. Internet usage and dissemination Mobile data traffic (2/2)
Mobile networks fuel connectivity growth

Global mobile data traffic (2015-2022f) Global data traffic in data centres (2015-2021st)
Unit: petabyte (10 15bytes) per month Unit: exabyte ( 1018bytes) per month
90 000 25 000
80 000
20 000
70 000
60 000
15 000
50 000
40 000
10 000
30 000
20 000
5 000
10 000
0 0
2015 2022f 2015 2021e
Source: Cisco Source: Cisco

3.2.2. Key market indicators Mobile network coverage (1/2)
Some regions are still lagging far behind in 4G deployment

Mobile network coverage by region in 2020
2G 3G 4G 5G
100%
12%
90%
29%
80% 42%
70% 56% 55%
69%
60%
85%
50%
82%
40%
30%
20%
10%
0%
Asia-Pacific China CIS(*) Europe Latin America MENA(**) North America Sub-Saharan
Africa
Source: GSMA

3.2.2. Key market indicators Mobile network coverage (2/2)
5G coverage will be far from complete by 2025

5G network coverage in 2025 by region
"Developed" Asia-Pacific 53%
North America 51%
China 48%
By 2025, 21% of the world's
population should be covered by 5G. Europe 35%
It is mainly the mature countries that
will benefit from access to very high- World 21%
speed mobile broadband, particularly
the so-called "developed" Asia-Pacific Gulf States(*) 21%
(China, Japan, South Korea, etc.),
CIS 14%
North America and Europe.
In 2021, 160 5G networks are already Latin America 10%
operational in 62 countries.
Rest of Middle East 7%
Rest of Asia-Pacific 5%
Sub-Saharan Africa 3%
0% 10% 20% 30% 40% 50% 60%
(*) United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain
Source: GSMA

3.2.2. Key market indicators Fixed telecom infrastructure (1/2)
DSL is losing ground to cable and fibre

Fixed telecom network subscriptions by technology
Unit: million subscriptions
DSL Cable Fibre Other
200
180
160
140
120
100
80
60
40
20
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: OECD
Fibre broadband subscriptions surpassed DSL connections across OECD countries for the first time in 2020. The pandemic has
led to a shift of online business and personal activities to the home, resulting in a record 21.15 million new fixed broadband
connections in the whole of 2020. As a result, fibre surpassed 30% of fixed broadband subscriptions in the 38 OECD member
countries, up from 12% a decade ago, thanks to a 14% year-on-year increase in subscriptions. While cable remains the
predominant fixed broadband technology, accounting for 34% of active subscriptions in the OECD, fibre is replacing DSL.

3.2.2. Key market indicators Fixed telecom infrastructure (2/2)
Fixed broadband coverage remains relatively low in some mature markets

Share of fibre subscriptions in total fixed broadband subscriptions in the OECD (2012-2020)
Unit: % share
2012 2020
United Kingdom
Germany
United States
Netherlands
Australia
Canada
Switzerland
Turkey
Mexico
Hungary
OECD
France
Chile
Portugal
New Zealand
Iceland
Spain
Sweden
Lithuania
Japan
South Korea
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Source: OECD

3.2.2. Key market indicators The differences between mature and emerging markets
A significant gap between mature and emerging markets

Key telecom indicators: comparisons between mature and emerging markets (2010-2019)
Units: % share, number of subscriptions per 100 inhabitants
Active mobile broadband Subscriptions to fixed

Households
subscriptions per 100 broadband networks
with Internet access
inhabitants per 100 inhabitants
2010 2019 2010 2019 2010 2019
100% 140 40
120 35
80%
30
100
60% 25
80
20
40% 60
15
40
10
20%
20 5
0% 0 0
Mature Emerging Mature Emerging Mature Emerging
Source: ICT

3.2.2. Key market indicators Telecoms operators' investments
Massive future investments in 5G

Investments by telecom operators over the period 2021-2025
Units: billion euros, % share
dont 5G
350
300
250
200
150
97%
100
87%
89% 72%
50
63% 63%
0 34% 57%
North America China Europe Asia-Pacific Latin America MENA(*) Sub-Saharan CIS(**)
Africa
Source: GSMA
Between 2021 and 2025, telecoms operators will have invested nearly €800bn in network infrastructure, 80% of which will be in
5G. With connectivity set to play an even greater role in a post-pandemic world, operators' continued investment in advanced
networks, particularly 5G, and digital services will be crucial to keep up with and support the evolution of society in the future.
Telecoms equipment suppliers will therefore be heavily relied upon to equip new and existing infrastructure with high
performance equipment.

3.2.3. Key data by geographical markets Worldwide
Almost 80% of the world's population will be using 4G or 5G by 2025

Key indicators for the global telecom equipment market (2020-2025)
2020 2025
5G
60%
WORLDWIDE 40%
Mobile network coverage
(% of connections)
20%
Key data 2020 0%
Mobile subscriptions 8.0 billion

Others 4G
of which smartphones 6.1 billion

Mobile data usage
Rate of equipment Mobile subscription
(average GB per month
in smartphones penetration rate
Total monthly mobile per subscriber)
35 EB
data traffic
Monthly data traffic by 2020 68% 67% 9.4

9.0 GB
smartphones
Population not covered

8% 2025f 79% 70% 34.0
by a mobile network
Sources and forecasts: GSMA and Ericsson

3.2.3. Key data by geographical markets North America
North America is expected to be the first region to exceed 50% 5G adoption rate.
Key indicators for the North American telecom equipment market (2020-2025)
2020 2025
5G
100%
NORTH AMERICA 80% Mobile network coverage

(% of connections)
60%
40%
20%
Key data 2020 0%
Mobile subscriptions 390 million

Others 4G
of which smartphones 320 million

Mobile data usage
3.7 EB
data traffic

11.1 GB
smartphones

1% 2025f 85% 85% 49.0
by a mobile network

3.2.3. Key data by geographical markets Europe
Europe will remain behind with 35% of connections in 5G by 2025

Key indicators for the telecom equipment market in Europe (2020-2025)
2020 2025
5G
80%
EUROPE 60%
(% of connections)
40%
20%
Key data 2020 0%

Others 4G

Mobile data usage
6.7 EB
data traffic

9.1 GB
smartphones

2% 2025f 83% 87% 38.0
by a mobile network

3.2.3. Key data by geographical markets Asia-Pacific
China is ahead of the rest of the Asia-Pacific region and behind

the United States
Key indicators for the Asia-Pacific telecom equipment market (2020-2025)
2020 2025 2020 2025

5G 5G
80% 100%
ASIA-PACIFIC 60%
(% of connections)
80%
60%
40%
40%
20% 20%
Key data 2020 0% 0%

Others 4G Others 4G
of which smartphones 3.5 billion

Mobile data usage
32.2 EB
data traffic
73% (China) 83% (China)
Monthly data traffic by 2020 11.5
10.6 GB 68% (Other) 58% (Other)
smartphones
Population not covered 1% (China) 89% (China) 85% (China)

2025f 37.0
by a mobile network 7% (Other) 83% (Other) 62% (Other)

3.2.3. Key data by geographical markets Latin America
Latin America to focus on 4G deployment by 2025

Key indicators for the Latin American telecom equipment market (2020-2025)
2020 2025
5G
80%
LATIN AMERICA 60%

(% of connections)
40%
20%
Key data 2020 0%
Mobile subscriptions 650 million

Others 4G

Mobile data usage
2.5 EB
data traffic

5.9 GB
smartphones

4% 2025f 81% 73% 29.0
by a mobile network

3.2.3. Key data by geographical markets Middle East and Africa
Almost a quarter of the population of sub-Saharan Africa

is not covered by a mobile network
Key indicators for the Middle East and Africa telecom equipment market (2020-2025)
2020 2025 2020 2025

5G 5G
MIDDLE EAST 80%
100%
80%
60%
& AFRICA
(% of connections)
60%
40%
40%
20% 20%
Key data 2020 0% 0%

Others 4G Others 4G

Mobile data usage
3.5 EB
data traffic
66% (MENA) 84% (MENA) 6.0 (MENA)
Monthly data traffic by 2020
4.4 GB 48% (SSA) 46% (SSA) 2.2 (SSA)
smartphones
Population not covered 9% (MENA) 80% (MENA) 85% (MENA) 30.0 (MENA)
2025f
by a mobile network 24% (SSA) 64% (SSA) 50% (SSA) 8.9 (SSA)
(*) Middle East and North Africa / (**) Sub-Saharan Africa / Sources and forecasts: GSMA and Ericsson

3.3. Leaders' activity and
performances

3.3.1. Revenue Leaders' cumulative revenue
The crisis did not have a significant impact on the industry

Cumulative revenue of the world's leading telecom equipment manufacturers
Unit: thousands of euros
500 000
The world's leading telecom
equipment manufacturers were not AAGR: +4.9%. 472 278
overly affected by the crisis in the 457 188
Covid-19 crisis as their aggregate 448 333
revenues grew by 3.3% in 2020. 450 000
430 220
The telecoms industry as a whole
benefited from the digitalisation of
business and personal interactions
brought about by the pandemic. 400 000 389 841
Businesses, governments, employees 372 383
and households dramatically increased
their use of networks for work,
consumption, entertainment and social 350 000
interaction during lockdowns.
Thus, telecom operators and public
authorities have maintained or even
increased their efforts to improve and 300 000
modernise infrastructures, for the
benefit of telecom equipment
professionals.
250 000
2015 2016 2017 2018 2019 2020
Source: Xerfi based on group financial reports

3.3.1. Revenue Leaders' rankings by revenue
Samsung-Huawei duo outstrips the competition

Ranking of the world's leading telecom equipment manufacturers by revenue in 2020
Unit: million euros
Samsung
Huawei
Cisco, Fujitsu, Qualcomm and NEC
Cisco are IT service providers with operations in telecom
equipment. They are therefore very diversified and
Fujitsu manage to perform well.
For its part, Samsung is one of the world's leading
Qualcomm consumer electronics companies and generates
huge revenue.
NEC
Ericsson
Among the specialists and historical leaders in telecoms equipment, Huawei is well ahead.
Nokia But the Chinese group could lose ground in the coming years because of the sanctions imposed
on it, which prevent it from operating in certain countries including the United States.
ZTE With revenues five times lower than Huawei's in 2020, Ericsson and Nokia are neck and neck
Ciena
0 20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 180 000 200 000

3.3.2. Operating profit rate Leaders' aggregate operating profit rate
Operating margins recovered in 2020

Aggregate EBIT rate of global telecom equipment leaders
Unit: % of cumulative turnover
18%
16,3%
After conceding a sharp decline in 16%
2019 (-4.8 points), the aggregate EBIT
rate of the world's leading telecoms
14% 13,4% 13,3%
equipment manufacturers rose again 12,8%
in 2020, to 13.3%. The increase in
12% 11,5%
their aggregate revenues and efforts
to optimise cost structures enabled 10,5%
operators to increase their margins. 10%
Fujitsu and NEC, for example, closed
production sites and divested 8%
unprofitable businesses as well as
some under-utilised assets.
6%
In addition, the health crisis boosted
the digital services activities in which
many operators are positioned and 4%
which present relatively high levels of
profitability. 2%
0%
2015 2016 2017 2018 2019 2020

3.3.2. Operating profit rate Leaders' aggregate operating profit rate
Restructuring, the rollout of 5G and the rise of digital services strengthened

leaders' profitability in recent years
Rankings of global smartphone industry leaders by EBIT rate
Unit: % of consolidated turnover
Average 2015-2020 2020
Cisco
Qualcomm
Samsung
Huawei
Ciena
Fujitsu
ZTE
NEC
Ericsson
Nokia
0% 5% 10% 15% 20% 25% 30% 35%
Ranking by average EBIT rate over the period 2015-2020 / Source: Xerfi based on group financial reports

3.3.3. Individualised performance Key performance indicators (1/3)
Huawei's competitors benefit from sanctions against the Chinese group

CONSO- AVERAGE
CAGR EBIT RATE
(2015-2020) (2020)
SALES (2020) (2015-2020)
•Ericsson's consolidated revenues grew by 2.3% in 2020, thanks to

market share gains in the United States, China, Japan and Europe in its
networking business. The group benefited in particular from the
ERICSSON 22 157 M€ -1.2% 12.0% 2.4% sanctions imposed on Huawei in certain countries.
•The EBIT rate went up despite increased R&D spending on equipment
and 5G technology.
•In 2020, revenue grew by 3.8% after 5 years of strong growth (14.5%
CAGR between 2015 and 2020) thanks to the dynamism of its
HUAWEI 113 249 M€ +17.7% 8.1% 9.4% smartphone sales and 5G equipment business in China.
•The EBIT rate deteriorated slightly in 2020 (8.1%) as a result of increased
investment in R&D and stock building.
•Revenue increased by 11.8% in 2020 thanks to its activities on the

Chinese market in telephone infrastructure and services.
ZTE 12 889 M€ +0.3% 5.4% 3.5% •The EBIT rate increased to 5.4% despite higher raw material costs and
R&D expenses in 2020.
•Nokia's revenue fell by 6.3% in 2020, weighed down in particular by the

Networks division. However, the decline was limited by an increase in
NOKIA 21 852 M€ +11.7% 4.0% 1.5% intra-group trade.
•EBIT rate to double by 2020 due to lower R&D and SG&A costs.

Telecom network specialists outperform

CONSO- AVERAGE
CAGR EBIT RATE
(2015-2020) (2020)
SALES (2020) (2015-2020)
•Sales rose sharply in 2020/2021 thanks in particular to the comparison

effect with the previous financial year and the surge in sales of 5G
QUALCOMM 28 072 M€ +7.3% 29.2% 22.4% equipment.
(09/2021)
•Strong increase in EBIT driven by strong sales and good control of the
cost structure.
•Cisco's revenue rose again in the last financial year (+1%). The group
notably benefited from the increase in customer investments in
CISCO 41 641 M€ +0.2% 25.8% 26.1% digitalisation and the cloud following the Covid-19 pandemic.
(07/2021)
•Decrease in EBIT rate due to significant restructuring costs incurred in
the last two years.
•Ciena's consolidated revenues declined by 1.1% in 2020. This decline

was mainly attributable to the Networking Platforms division.
3 137 M€ •Record EBIT rate thanks to lower operating expenses and a sales
CIENA +7.6% 13.8% 8.5%
(10/2020) momentum boosted by the pandemic. The group also suspended its
share buyback programme at the beginning of the year at the height of
the health uncertainties, reducing expenses.

Japanese players dependent on the dynamics of the Japanese market

CONSOLIDAT AVERAGE
CAGR EBIT RATE
ACTORS ED AC EBIT RATE KEY DRIVERS OF GROWTH AND PROFIT
(2015-2020) (2020)
(2020) (2015-2020)
•Revenue in 2020 increased by 2.8% compared to 2019 thanks to strong

sales in Q4.e
SAMSUNG 176 051 M€ +3,4% 15,2% 17,1% •The EBIT rate was slightly down on the average rate for the period
(15.2%) despite the implementation of a cost reduction strategy.
•Group revenue fell by 6.9%, despite an increase in the network business

focused on 5G base stations and continued high demand for electronic
components (especially semiconductors).
•The closure of the Mie semiconductor plant (in Japan) and the group's
29 023 M€ withdrawal from European markets with low profitability weighed on
FUJITSU -5,4% 7,4% 4,5%
(03/2021) revenues.
•Improvement of the EBIT rate thanks, among other things, to the
disposal of some unprofitable activities, the reduction of expenses
related to the change of the Group's business model and the closure of a
production site in Augsburg (Germany).
•The group's consolidated revenues decreased by 3.3% in FY 2020/2021.

The Network Services and Public Infrastructures businesses performed
well but were unable to offset the decline in revenues in the other
NEC 24 207 M€ +1,2% 5,1% 3,1% segments.
(03/2021)
•Increase in the EBIT rate mainly due to the discontinuation of
unprofitable activities, the sale of land and capital gains on the sale of
subsidiaries.

4. Competition and
leaders' strategies

4.1. Competitive environment Overview of power relations in telecom equipment
Strong competition due to the maturity and standardisation of the market

Competitive forces in the global telecom equipment industry
Threat of new Government

entrants influence
+ ++
Bargaining power of
+++ Bargaining power of
suppliers customers
+
rivalry +++
Threat of substitutes How to read this chart:

- The darker the shading, the
stronger the force

4.1. Competitive environment Intra-sectoral competition (1/2)
Development of numerous partnerships to avoid missing the 5G shift
New entrants Government

+ ++
Suppliers Customers
+ +++ +++
Rivalry
Substitutes
-
• The technological maturity of the products (characterised by a high degree of standardisation and commoditisation) refocused price
competition between the four dominant integrated telecom equipment suppliers: Huawei, Nokia, Ericsson and ZTE. Japan's Fujitsu and
NEC also offer comprehensive product portfolios, but their influence is mostly limited to their home territories. With little room for
product differentiation, leaders mainly focus on incremental innovation.
• Moreover, these four leaders also have an advantage over network specialists (Cisco, Ciena, Samsung, Juniper or Infinera) as their offer
includes both basic infrastructure and network & IT solutions. They therefore address both telecom operators and user companies and
administrations, to whom they can offer products and services optimised for the networks to which they are connected.
• While the emergence of software solutions, which reduce the demand for traditional equipment, provided a field of differentiation, it
also widened the scope of rivalry for telecom equipment players, leading them to position themselves more on services and the
provision of software associated with telecom equipment. Historically, increased competitive pressures accelerated industry
consolidation. With the rollout of 5G, this dynamic could become even more pronounced. For the time being, players are multiplying
partnerships aimed at developing 5G solutions, such as Qualcomm and NEC in November 2021.

4.1. Competitive environment Intra-sectoral competition (2/2)
Challengers have to join forces to compete with the five leaders

Market shares of telecom equipment suppliers (2020)
Unit: % share of market by value
In order to reduce the pressure on

prices, telecom equipment leaders
tended to consolidate in recent years,
such as Nokia's takeover of Siemens'
Network business in 2006 and Alcatel
in 2016. As a result, 4 major players
18%
dominate the telecom equipment Huawei
industry. Huawei, Ericsson, Nokia and 31%
ZTE accounted for 71% of the total Ericsson
value of the global telecom 2% Nokia
equipment market in 2020. 3%
ZTE
Faced with the power of these groups,
smaller players regularly choose to 6% Cisco
join forces in order to compete with Ciena
the leaders, particularly in terms of
technology. The rise of 5G tends to 10% Samsung
accelerate the race for technology Others
15%
and the number of alliances between
operators is increasing in order to 15%
limit the risks of producing offers that
are less competitive than that of the
competitors.
Source: Statista

4.1. Competitive environment Threat of new entrants
Innovation as the main route for new entrants

+ ++
Suppliers Customers
+ +++ +++
Rivalry
Substitutes
-
• The barriers to entry into the telecoms equipment market are particularly high, with huge investments in research and development
and the need for specialised skills. In addition, existing operators benefit from a high level of recognition, a strong brand image and
historical partnerships with telecom operators, which reinforces their market power. Finally, the standardisation of the telecom
equipment offer focuses competition on price. Economies of scale are therefore a major challenge for operators' competitiveness and
new entrants can hardly achieve the production volumes necessary to compete with the leaders.
• However, the threat of new entrants disrupting the competitive landscape has not been entirely discounted. The growing importance of
software solutions (e.g. upgrading 4G base stations to support 5G standards) opens the door to potentially smaller but highly
innovative outsiders. The US start-up Altiostar Network is a good example. In 2019, it won a contract to provide the virtual radio access
network (vRAN), including all the virtual core and distributed units (vCU, vDU), for Rakuten's mobile network in Japan. Thus, major
technological developments could challenge the dominance of the handful of companies that traditionally provided the bulk of
telecom networks worldwide.

4.1. Competitive environment Government's influence (1/2)
Leadership in 5G is a major challenge for some states

+ ++
• In order to extend networks and facilitate access to telecommunications services
for as many people as possible, governments are making a major contribution to
Suppliers
+++
Customers infrastructure development, particularly through investment plans.
+ +++
Rivalry
• The financial and economic stakes are huge and are reinforced by the advent of
Substitutes next generation networks. The development of ultra-fast 5G standards, which
-
promise to generate hundreds of billions of euros in revenue over the next decade,
means that the country will benefit greatly from being ahead in this field.
• Leadership in 5G thus became a key component of the US-China tug-of-war for technological supremacy. Since 2018, the United States
have been implementing restrictive measures for Chinese players, notably Huawei and ZTE (ban on US companies selling them
equipment, software and materials, including basic chips used in telecommunications infrastructure, ban on these groups operating on
US territory, etc.). Huawei's leadership in 5G networks is therefore threatened, especially as other countries, such as Australia and New
Zealand, have followed the US directives and excluded Huawei's mobile infrastructure kits from their markets.
• However, unlike 3G/4G networks, where they were late to enter, Chinese operators gained a major advantage in 5G by setting their own
technology standards. Huawei and ZTE invested huge amounts of money in 5G research. Since 2009, for example, Huawei invested
more than €5bn in the development of 5G equipment. It holds over 3,000 patents in 5G, accounting for over 15% of all 5G patents
worldwide.

4.1. Competitive environment Government's influence (2/2)
Sino-US tensions excluded Huawei from some markets

Suppliers of 5G mobile stations to US and Korean telecom operators
South Korea and the US were the first
two countries to roll out 5G networks TELECOM.
(limited scale deployment in key cities OPERATORS SAMSUNG ERICSSON NOKIA HUAWEI
or for enterprises) in 2018. (Country)
Telecom operators in both countries
Verizon
🗸 🗸
have chosen various suppliers for
their base stations, including (United States)
Samsung, Ericsson and Nokia.
While none of the US operators
purchased 5G infrastructure from
Huawei, South Korea's LG Uplus was
the only one of the five operators to
AT&T
(United States) 🗸 🗸 🗸
source 5G equipment from China's
Huawei.
The escalating tensions between
Washington and Beijing excluded
SK Telecom
(South Korea) 🗸 🗸 🗸
Huawei and ZTE from the US market,
while the US lobbying of its allies to
exclude Chinese operators from other
markets on national security grounds
KT
(South Korea) 🗸 🗸 🗸
led some operators to move away
from Huawei and ZTE equipment.
Nevertheless, Huawei won over 1,000
commercial 5G contracts worldwide.
LG Uplus
(South Korea) 🗸 🗸 🗸 🗸
Source: Xerfi based on operators and specialised press

4.1. Competitive environment Bargaining power of customers (1/4)
Oligopolistic customers with strong bargaining power
New entrants Government • Telecom equipment manufacturers have little bargaining power with their
+ ++
customers, mainly telecom operators. Historically concentrated, the telecom
services market tended to consolidate further in recent years, with generally a small
Suppliers Customers
+ +++ +++ handful of operators per country. This situation, combined with the standardisation
Rivalry
of equipment offerings, allows operators to exert strong pressure on prices since
Substitutes the loss of a customer can have major consequences for a telecom equipment
-
supplier.
• In addition, the convergence of services (the development of so-called "quadruple play" offers encompassing fixed telephony, Internet,
television and mobile services), which plays into the hands of telecom operators who own fixed and mobile network infrastructures,
continues to develop, particularly in Europe. Around the world, mergers between content providers and telecom service operators are
multiplying. In the US, AT&T bought Time Warner, owner of the HBO and CNN television channels, in June 2018. In Europe, Orange
announced in May 2021 that it was studying the purchase of the infrastructure operator TDF. Earlier, in September 2021, China Mobile
and cable operator China Broadcasting Network worked out the terms of a joint plan to implement 5G on 700 MHz, with the operator
to control base station prices and own 100% of the shared network.
• Finally, there have been numerous 5G network sharing agreements between telecom operators, in addition to other initiatives to
improve profitability. Network providers are looking to optimise their operating and network expansion/modernisation costs, to the
detriment of demand on telecom equipment manufacturers. As an example, in November 2021, Orange created a subsidiary called
Totem, which aims to add value to its passive mobile infrastructure and open it up to other operators.

Network sharing allows operators to reduce costs

Network sharing agreements and other transactions aimed at strengthening the market power of telecom operators
Markets concerned
JAPAN SPAIN
FRANCE
In June 2021, Japanese operators Softbank

In March 2021, Másmóvil issued a public
and KDDI launched the deployment of a In November 2021, Iliad (Free's parent takeover bid for the Basque operator
the deployment of a joint/shared MORAN company) opened the door to a network Euskaltel. The Spanish operator intends to
(Multi-operator radio access network) in sharing agreement with French market accelerate its investments in FTTP and 5G
order to reduce costs and accelerate the Orange to reduce 5G deployment costs. networks in order to better compete with
roll-out of their 5G network. To do this, The aim is to replicate the partnership the leading trio of Telefónica, Orange
they called on several manufacturers, concluded between the other two major and Vodafone.
including Ericsson and and Nokia. operators, Bouygues Telecom and SFR.

Less need for telecom equipment

Scope and expected benefits of network sharing for telecom operators
EXPECTED BENEFITS
SCOPE OF APPLICATION EQUIPMENT
FOR OPERATORS
• Telecommunications towers
PASSIVE
• Associated premises (buildings,
INFRASTRUCTURES power supply facilities, etc.)
• Lower investments (cost reduction)
• Basic stations
• Base station controllers • Synergies in operation
• Mobile Radio Access Networks
ACTIVE (RAN) • Faster deployment of
INFRASTRUCTURES • Mobile switching centres of 5G networks and associated
• Radio equipment services
microwave equipment
• Antennas • Optimisation of the use of
networks (better efficiency)
Infrastructures that provide
transmission of data from the core • Extension of geographical coverage
(RAN) to the periphery (data centres
BACKHAUL providing content and applications),
such as fibre optic transmission
networks.

A concentrated customer market increases the risks for 'small' players

Weight of Ciena's main customers (2019)
Unit: share in % of consolidated turnover
In fiscal 2019, Ciena's top 10

customers accounted for 54.5% of its Verizon
consolidated revenue. Sales to 87,1% Main client 12,9%
Verizon reached €402.9m, or 12.9% of
Others
the group's total revenue, while AT&T
reached €340.6m Ciena (10.9%).
Small telecom equipment suppliers,
such as Ciena, tend to be heavily
dependent on a small number of
customers, tipping the balance of Top 10
power in their favour. Others
Any significant change in clients'
investment budgets or the loss of a
major account can affect operators'
12,9%
financial performance. Verizon 2 main
76,2% 45,5% Top 10 54,5%
clients
AT&T
10,9%
Others
2020 data for Verizon was not provided / Source: Ciena

4.2. Leaders' strategies Overview
The race for technology rages on in telecom equipment

Development areas of the world's leading telecom equipment manufacturers
• Focus on new network technologies

• Develop solutions adapted to the increasing
INNOVATION STRATEGIES complexity of networks (automation, etc.)
• Provide turnkey offers
OF LEADING
TELECOM • Position on the downstream side of the
DIVERSIFICATION value chain (digital services, IoT, etc.)
EQUIPMENT • Expand internationally
MANU-
FACTURERS • Develop expertise through partnerships
• Investing in start-ups
EXTERNAL GROWTH • Acquire companies with differentiating know-how
and/or positioned on a targeted market
These objectives are supported by measures to improve operational efficiency and

streamline the portfolio in line with market trends.
Source: Xerfi

4.2. Leaders' strategies R&D Investments (1/2)
Leaders devote considerable budgets to R&D

Rankings of telecom equipment leaders by R&D rate (2020)
Unit: % of consolidated turnover
Qualcomm
The telecom equipment industry is Nokia

innovation-driven, as highlighted by
the relatively high R&D-to-Sales Ericsson
ratios of the major players.
As the rollout of 5G networks Huawei
accelerates, telecoms equipment
suppliers are hoping to make the
most of their R&D investments in this Ciena
area.
For example, Huawei invested over ZTE
€5bn in 5G since 2009. It holds more
than 3,000 patents in 5G, representing Cisco
more than 15% of all 5G patents
worldwide. Samsung
Average R&D rate: 12.7%
Fujitsu
0% 5% 10% 15% 20% 25%
Xerfi processing / Source: group financial reports

4.2. Leaders' strategies R&D Investments (2/2)
6 telecom equipment industry players in the world's top 50 in R&D
World ranking of companies investing the most in R&D (2019)

Unit: million euros
1. Alphabet
2. Microsoft
3. Huawei
4. Samsung
5. Apple
6. Volkswagen
7. Facebook
8. Intel
9. Roche
10. Johnson & Johnson
20. Bosch
24. Cisco
30. Abbvie
31. Qualcomm
36. Nokia
40. Fiat Chrysler
48. Ericsson
50. Continental
0 5 000 10 000 15 000 20 000 25 000
Xerfi processing / Source: European Commission, The 2020 EU Industrial R&D Investment Scoreboard

4.2. Leaders' strategies R&D partnerships with telecom operators
Development of partnerships to adapt the offer to specific customer expectations

Recent examples of partnerships between telecom equipment players and operators
COMPANY PARTNERS COUNTRY DESCRIPTION
In October 2021, Ericsson and Mobile TeleSystems, Russia's

leading telecom operator, entered into a strategic partnership to
develop private 5G networks for industrial companies in Russia.
In September 2021, ZTE signed a strategic cooperation

agreement with China Telecom Global. Under this agreement,
the two players committed to deepen their collaboration in R&D
around cloud network services in particular.
In October 2021, ZTE and China Unicom launched a commercial

trial of the first intelligent radio network orchestration solution
(with user and network orchestration) in Dalian, China.
In November 2021, Cisco expanded its partnership with

Indonesian telecom operator Indosat Ooredo to develop new 5G
and broadband connectivity solutions for the country's
businesses.
In May 2021, Fujitsu partnered with Rakuten Mobile to develop

state-of-the-art 4G and 5G Open RAN solutions for integration
World with the Rakuten Communications Platform offering in the global
market.

4.2. Leaders' strategies R&D partnerships between competitors
Some actors pool their expertise to better innovate

Recent examples of partnerships established by telecom equipment players
In October 2021, Ciena and Samsung announced their new collaboration around the development of
advanced 5G solutions. The agreement leverages the Korean giant's RAN and core 5G capabilities while
the US group will contribute its expertise in xHaul routing and switching.
In November 2021, Qualcomm and NEC partnered to develop an open, virtualised 5G distributed unit,
powered by Qualcomm technology, to support the transition of telecom infrastructures to modern
networks. In particular, the two groups intend to meet the technology requirements of new networks,
simplify deployments and reduce acquisition costs by offering high-performance, energy-efficient,
virtualised and cloud-native solutions.

4.2. Leaders' strategies The race for innovation in 5G (1/2)
Chinese players are ahead in 5G technologies

5G patent holders (2021)
Unit: share in % of total number of 5G patents
China took a technological lead in 5G Huawei (China) 15,4%

as Huawei and ZTE together account
for more than a quarter of active Qualcomm (USA) 11,2%
patents in 5G. And this share
becomes even higher when ZTE (China) 9,8%
considering their compatriots outside
the telecom equipment industry such Samsung (South Korea)
as Oppo and Vivo. Nokia (9%),
Samsung (9.7%) and Qualcomm
(11.2%) also appear to be in the lead. Nokia (Finland) 9,0%
Patents are essential for telecom
equipment manufacturers as they LG Electronics (South Korea) 7,0%
allow them to protect a possible
competitive advantage due to an Ericsson (Sweden) 4,4%
innovation that outperforms the
existing offer of the competition. It is ...
also a means of generating additional
revenue through licensing.
NEC (Japan) 0,7%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18%
Source: Statista

4.2. Leaders' strategies The race for innovation in 5G (2/2)
Leaders seek to develop the most efficient 5G

Recent examples of innovations in 5G equipment
In November 2021, Nokia announced the successful

completion of the first trial of the broadband (25 Gbps)
passive optical network (PON) technology in
collaboration with Bell Canada. This is compatible with
current optical technologies and can support 5G
transport.
In October 2021, Ericsson unveiled Critical IoT, a system

that ensures low latency and high reliability over 5G
Innovations in networks. Easily deployable, the software aims to
5G equipment enhance cloud gaming and augmented/virtual reality
experiences, as well as offer new possibilities in remote
control, automation, mobility and industrial control.
In September 2021, Ciena acquired Vyatta routing and

switching technology from AT&T. This deal allowed it to
expand its capabilities and enhance its 5G equipment
offer.

4.2. Leaders' strategies Monetisation of patent portfolios (Huawei)
Huawei sought new sources of revenue in the face of US sanctions

Presentation of Huawei's patent portfolio monetisation strategy
1. History of patent management at Huawei: Historically, Huawei's position on intellectual property was very flexible.
Huawei did not charge for the integration of its technologies into the electronic products of its partners.
Context
2. Changes following US trade sanctions: The group reviewed its position following trade sanctions issued against it in
the US and other countries subsequently, which significantly hampered its business and affected its revenues.
Huawei has very strong bargaining power with its 5G technology customers, especially smartphone manufacturers.
Bargaining
To be able to operate in 5G, phones need to incorporate specific technologies. Huawei holds the largest portfolio of patents
power essential to 5G and established many standards in this area. The Chinese group is therefore virtually unavoidable.
Since the introduction of its patent monetisation policy, Huawei has been charging $2.5 per licence and per device.
This is less than its European (Nokia and Ericsson) and especially American competitors. By comparison, Qualcomm charges
Billing
Apple $7 per licence and per device, which led to years of litigation between the two groups.
and income Ultimately, Huawei generated between €1bn and €1.5bn in additional revenue from the monetisation of its 5G patent
portfolio over the period 2019-2021.
Source: Xerfi based on Huawei and specialised press

4.2. Leaders' strategies Development of a turnkey offer (1/2)
Leaders review their business model towards more integration

Main trends in demand for telecom equipment
Concentrated customer
Complexity
market/Network sharing • Telecommunications networks are under increasing
of telecom networks pressure as increasingly connected consumers and
between telecom operators
businesses fuel the growth of data traffic.
• In addition, multiple telecommunication services

(fixed and mobile communications, content, etc.)
are carried on a single network (a trend called
convergence).
DEMAND FOR TELECOM EQUIPMENT SHIFTS TO • At the same time, the telecom services sector is
AUTOMATION AND DIGITAL SERVICES consolidating, and network sharing agreements are
increasing. These trends increase the bargaining
power of customers towards telecom equipment
providers.
• The above factors led to a reconfiguration of the

business models of telecom equipment
Convergence between manufacturers. They are now focusing on
Growing demand for
fixed and mobile and combining hardware and software to provide
analytics and smart grids turnkey solutions and offers.
between IP and the cloud

4.2. Leaders' strategies Development of a turnkey offer (2/2)
New products to support new network requirements

Main areas of development of the telecom equipment manufacturers' offer and examples of recent launches
Equipment Services Software
In collaboration with key players

in the gaming ecosystem
In November 2021, Nokia (Microsoft, Valve, etc.),
expanded its Wavence Qualcomm launched the In December 2020, NEC
product portfolio with the Qualcomm FastConnect 4-stream completed the acquisition
launch of new Dual Band Simultaneous in of Swiss fintech Avaloq. The
indoor/outdoor backhaul November 2021. Supported start-up offers innovative
solutions capable of natively on Windows11, this digital banking solutions,
supporting telecom allows the performance of core banking software and
operators' communication multiple Wi-Fi bands and wealth management
services and critical network antennas to be leveraged technology.
requirements. simultaneously to combine the
output of two devices into one,
eliminating in-game latency.
Source: Xerfi

4.2. Leaders' strategies The rise of software solutions (1/2)
Software solutions enable some convergence between telecom equipment

manufacturers and IT service providers
Positioning and contribution of a telecom network automation software offer
of telecom networks
Software for the
automation
Providers Manufacturers of
IT service telecom
providers equipment
Mobile Fixed
Mobile Fixed Wi-Fi
Wi-Fi
Through software (virtualisation), fixed, mobile and Wi-Fi networks, previously managed
independently, can be consolidated and automated. This gives telecom operators greater flexibility,
while significantly reducing upgrade costs.

4.2. Leaders' strategies The rise of software solutions (2/2)
Players benefit from network virtualisation

Cumulative SDN (*)and NFV (**)traffic compared to total data traffic
Units: ZB per year, % share
8 60%
The growing adoption of software
solutions, particularly SDN (Software
Defined Networks) and NFV (Network 7
50%
Functions Virtualization), by telecom
operators and other equipment 6
vendor customers is driven by the
effectiveness of these solutions in 40%
routing data centre traffic to deal with 5
bandwidth bottlenecks (increased
data traffic from heavy workloads 4 30%
such as video streaming, cloud
gaming, etc.) as well as their ability to
seamlessly transport large data sets. 3
20%
By 2021, SDN/NFV traffic accounted
for about half of total data traffic, up 2
from 28% in 2016. This is expected to
boost revenues for telecom 10%
equipment providers focused on 1
software or end-to-end solutions.
0 0%
2016 2017 2018 2019 2020 2021
(*) SDN = Software-Defined Networking / (**) NFV = Network Functions Virtualization

Source: Cisco

4.2. Leaders' strategies The integration of artificial intelligence
Leaders improve their offer thanks to artificial intelligence

Examples of initiatives in the field of artificial intelligence
In November 2021, Ericsson Canada partnered with

Deep learning algorithms are
Concordia to enable its employees to expand their skills in
particularly effective in representing artificial intelligence and machine learning by working with
and analysing complex situations researchers and graduate students at the university.
when a large amount of information is The group's goal is to stimulate the emergence of new AI
available. However, telecom networks projects in an ever-changing market.
are complex, comprising many
components with multiple parameters
that can be influenced, which makes
modelling them for optimisation
complex. Telecommunication In October 2021, Cisco integrated holograms and more
networks also generate a very large artificial intelligence (AI) into its Cisco Webex video
conferencing service. The new features include raising a hand
amount of data on their operation
to speak, optimising sound quality and automatically
(telemetry, quality of service, cropping participants to improve body language reading.
availability rate, etc.) allowing their
operators to have a precise picture of
their performance. This complexity
and abundance of data naturally
piqued operators and equipment In November 2021, Huawei and China Mobile accompanied
manufacturers' interest in artificial Haier, first Chinese manufacturer of consumer electronics and
intelligence to optimise network household appliances, in the deployment of innovative
operation. production processes combining 5G and artificial intelligence
in its "smart" factories. Huawei will help Haier to roll out the
same model to 100 of its sites worldwide within five years.

4.2. Leaders' strategies Diversification into the Internet of Things (IoT)
The democratisation of the IoT offers opportunities for

telecom equipment operators
Areas of diversification for telecom equipment manufacturers in the Internet of Things market
Core IoT Global

IoT Services IoT
Tailor-made solutions
Connectivity (infrastructure)
Orchestration of the ecosystem
Big Data and Analytics
General features
Security functions
AI-powered solutions (machine,
Service management
deep learning, etc.)
+ Value creation +++

4.2. Leaders' strategies External growth (1/2)
The US market has been attracting interest since Huawei's withdrawal

Recent examples of external growth in the telecom equipment industry
Diversification / Strengthening of activities
In November 2020, Ericsson acquired Cradlepoint, the leading

In February 2020, Nokia announced the acquisition of Elenion, provider of 4G and 5G wireless WAN solutions for businesses in
a US company specialising in silicon photonics technology. the US market. The group intends to strengthen its position in
Elenion's expertise will enable Nokia to expand its telecom the rapidly growing 5G BtoB market. Cradlepoint provides
equipment offering. The use of silicon also brings key time-to- solutions that enable businesses to easily and securely connect
market and cost advantages in the optical segment. sites, vehicles, mobile workforces and connected objects via
cellular technology.
Internationalisation
In January 2020, Samsung acquired TeleWorld Solutions in

In November 2021, Ericsson completed one of the largest order to enter the 5G network infrastructure market in the
transactions in its history with the acquisition of Vonage for United States. The Korean group was looking to take
approximately €5.4bn. This acquisition is part of the Swedish advantage of Huawei's difficulties in this market to strengthen
group's strategy to expand its global offering, particularly in its positions. Based in Virginia, TeleWorld Solutions is a service
the area of wireless communications. provider specialising in optimisation tests for telecom
operators.

4.2. Leaders' strategies External growth (2/2)
Cisco is buying up start-ups to expand into high-potential markets

markets with high potential
Major Cisco acquisitions in the last 5 years
Duo Security PortShift Kenna Security

CloudLock
SECURITY Security solutions for
Security Risk management
Cloud security of containerised and vulnerability
the cloud
applications analyses
AppDynamics BroadSoft Banzai Cloud Epsagon Dashbase

Development,
CLOUD Software for cloud Cloud-based call and deployment, execution Cloud-based Risk management
applications contact centre and security of cloud application and vulnerability
and monitoring solutions applications management solution analyses
IA MindMeld Springpath ThousandEyes Sedona Systems

IOT Accompany Fluidmesh
AI-based AI-driven relational
SOFTWARE conversational
Hyperconvergence
software intelligence platform
Network optimisation
software
Wireless IoT solutions
Network automation
and control solutions
platform
ANALYTICS
Leaba Viptela Luxtera Acacia

BASIC
EQUIPMENT Manufacturing of
Semi-conductors
Virtualised network
products (software)
Semiconductors for
optical networks
Photonic equipment
on silicon
2016-2017 2018-2019 2019-2021

5. Sources

Group websites
Ciena www.ciena.com
Cisco www.cisco.com
Ericsson www.ericsson.com
Fujitsu www.fujitsu.com
Huawei www.huawei.com
NEC www.nec.com
Nokia www.nokia.com
Qualcomm www.qualcomm.com
Samsung www.samsung.com
ZTE www.zte.com.cn

The professional press
Business, economic and financial news

Bloomberg
www.bloomberg.com
Financial news
Financial Times
www.ft.com
Multinational news agency

Thomson Reuters
www.thomsonreuters.com
Global Economic and Financial Journal

Wall Street Journal
online.wsj.com
Weekly business newspaper

The Economist
www.economist.com
Economic and financial news

Forbes Magazine
www.forbes.com

Professional organisations and data sources
Consulting and research company in the field of IT

Gartner
www.gartner.com
German consumer research institute

GfK
www.gfk.com
International Data Corporation

IDC
www.idc.com
International Telecommunication Union (United Nations)

ITU
www.itu.int
International association representing telecom operators

GSMA
www.gsma.com
Organisation for Economic Co-operation and Development

OECD
www.oecd.org
Research firm specialising in the telecoms industry

Dell'Oro
www.delloro.com

6. Annexes

Exchange rates
Average exchange rate for the year 2020: 1 EUR = 1.14127 USD
Exchange rate for the period from 01/11/2019 to 31/10/2020: 1 EUR = 1.12591 USD
United States dollar
Chinese Yuan Average exchange rate for the year 2020: 1 EUR = 7.84595 CNY
South Korean Won Average exchange rate for the year 2020: EUR 1 = KRW 1 345.10666
Yen Exchange rate for the period 01/04/2020 to 31/03/2021: EUR 1 = JPY 123.68333
Swedish Krona Exchange rate for the year 2020: 1 EUR = 10.48813 SEK

Glossary
ITEM DEFINITION
Assets encompass all the economic resources owned by a company. They are commonly divided into short term (cash, trade
Assets
receivables, etc.) and long term assets.
CAGR Acronym for Compound Annual Growth Rate.
Short for "Capital Expenditure", an item of the cash-flow statement used as a proxy for investment in property, plant and
Capex
equipment (PPE). Generally entails physical assets used to maintain or increase operation capacities.
Capex ratio The percentage ratio between capital expenditures and net sales.
The current ratio is found by dividing current assets by current liabilities and indicates whether the company has enough
Current ratio
resources to pay its short term debt (12 months).
Debt-to-equity The ratio between total liabilities and total equity, reflecting the company’s relative amount of debt.
Free
The cash that a company is able to generate after subtracting expenses needed to maintain its asset base.
cash flow
Gross profit is the result of the difference between total sales and the cost of making products or providing services. Payroll and
Gross profit
interest costs as well as taxes are not taken into account.
Impairment Impairment charges occur when a company has found that the value of its goodwill has been overestimated and needs to be
charge revised.
Interest coverage is calculated by dividing operating income by net interest expenses and reflects the company's debt burden, i.e.
Interest coverage
its ability to pay interest on outstanding debt. The lower this ratio, the more the company is burdened by interest expenses.
Liabilities encompass all obligations arising from a company's past operations and which will result in an outflow of resources in
Liabilities
the future. Liabilities are divided into short term and long liabilities, and represent the debt a company owes to its creditors.

Glossary
ITEM DEFINITION
Net debt Net debt is calculated by subtracting a company's cash from its total debt.
Net profit/ Net profit refers to a company's total earnings. It is the result of the difference between net sales and all operating and non-
net margin operating expenses such as taxes, interests, depreciation and amortisation expenditures.
Operating profit refers to the earnings generated by the normal business operations of a company. Operating profit is the result
Operating profit/
of the difference between sales and total operating expenses. Operating margin is expressed in % and is computed by dividing
operating margin
operating profit by net sales.
Expenses associated with the research and development process of creating new products or services; it is often used as a proxy
R&D expenditure
for innovation.
Return on assets is calculated by dividing a company's net income by its total assets. It measures the ability of the company to
Return on assets (ROA)
generate profits from its assets.
Return on equity is calculated by dividing a company's net income by its shareholder equity. It measures the ability of a company
Return on equity (ROE)
to generate profits from its investment funds.
Earnings made from the sales of goods and services, excluding VAT and other taxes. Reflects, total volumes sold, selling prices,
Sales
exchange rates and product mixes.
The quick ratio is calculated by dividing current assets net from inventories by current liabilities and measures the company’s
Quick ratio
immediate capacity to repay its short term debt.
Working capital is the difference between currents assets and current liabilities. When positive, working capitals means a
Working capital
company would able to pay its short term debt.

The Global Telecom Equipment Industry (December 2021)

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Global Telecom Equipment Industry (December 2021)

Uploaded by

Copyright:

Available Formats

The Global Telecom

Market analysis – 2021-2040 Trends -

Date of publication December 2021

Main contributors Lauric Berthier and Flavien Vottero

Report code 21WXEEE03

Identification of market leaders

Identification of the main market indicators

Identification of corporate strategies

Identification of the key conclusions

This is a collective report written Other contributors include: Gabriel Giraud

The Global Telecom Equipment Industry - December 2021 2

3. The market and leaders' activity 27

3.2. The global telecom equipment market 41

3.3. Leaders' activity and performances 57

The Global Telecom Equipment Industry - December 2021 3

4. Competition and leaders' strategies 65

4.2. Leaders' strategies 76

The Global Telecom Equipment Industry - December 2021 4

The Global Telecom Equipment Industry - December 2021 5

Main trends 2021-2025

The Global Telecom Equipment Industry - December 2021 6

The industry is mainly addressing telecom operators

Telecom equipment and related services

Operators are the main customers of

Xerfi processing / Sources: Orange and MTN Consulting

The Global Telecom Equipment Industry - December 2021 7

Massive future investments in 5G

The Global Telecom Equipment Industry - December 2021 8

Some regions are still lagging far behind in 4G deployment

The Global Telecom Equipment Industry - December 2021 9

5G coverage will be far from complete by 2025

Developed Asia-Pacific 53%

North America 51%

0% 10% 20% 30% 40% 50% 60%

The Global Telecom Equipment Industry - December 2021 10

North America to take the lead in 5G deployment

The Global Telecom Equipment Industry - December 2021 11

Mobile networks fuel connectivity growth

Source: Cisco Source: Cisco

The Global Telecom Equipment Industry - December 2021 12

Challengers have to join forces to compete with the five leaders

In order to reduce the pressure on

The Global Telecom Equipment Industry - December 2021 13

6 telecom equipment industry players among the world's R&D top 50

0 5 000 10 000 15 000 20 000 25 000

The Global Telecom Equipment Industry - December 2021 14

Huawei's competitors benefit from sanctions against the Chinese group

•Ericsson's consolidated revenues grew by 2.3% in 2020, thanks to

•Revenue increased by 11.8% in 2020 thanks to its activities on the

•Nokia's revenue fell by 6.3% in 2020, weighed down in particular by the

The Global Telecom Equipment Industry - December 2021 15

Telecom network specialists outperform

•Sales rose sharply in 2020/2021 thanks in particular to the comparison

•Ciena's consolidated revenues declined by 1.1% in 2020. This decline

The Global Telecom Equipment Industry - December 2021 16

Japanese players dependent on the dynamics of the Japanese market

•Revenue in 2020 increased by 2.8% compared to 2019 thanks to strong

•Group revenue fell by 6.9%, despite an increase in the network business

•The group's consolidated revenues decreased by 3.3% in FY 2020/2021.

The Global Telecom Equipment Industry - December 2021 17

The race for technology rages on in telecom equipment

• Focus on new network technologies

These objectives are supported by measures to improve operational efficiency and

The Global Telecom Equipment Industry - December 2021 18