Top

Tough Year Ahead for Nokia as Ericsson Extends Market Share

Ericsson and Nokia reported 4Q 2020 and full-year 2020 results recently. Ericsson reported healthy financials which shows that it is continuing to benefit from the ramp-up of 5G deployments across the world. Nokia reported declining revenues with expectations that 2021 will be a tough year as the vendor starts executing its new strategy.

Market Share Gains for Ericsson

Ericsson reported a significant increase in RAN hardware sales during the 4Q, an indication that it is extending its footprint. Strong growth was experienced in China, North America and in the Southeast Asia, Oceania and India region driven mainly by Australia, India and Japan. In Europe, however, the growth was purely from market share gains as the overall market was sluggish and is not growing at this time. Although revenues decreased in Africa and Latin America during the latest quarter, Ericsson expects to increase market share in both these markets over the coming months as well as in China.

The Swedish vendor now claims that it is seeing market share gains globally from all its competitors and not just in markets where Huawei and ZTE are absent. Ericsson expects this to continue at least through to mid-2021. Counterpoint Research believes that this is due to the competitiveness of its 5G product portfolio from a cost and product feature perspective and due to its future roadmap. In addition, its sustained investment in R&D continues to generate TCO  savings for its MNO customers.

Nokia Restructuring

In the the midst of restructuring, Nokia will struggle in 2021 with a further reduction in market share expected, a consequence of the vendor failing to convert all its 4G footprint into 5G. Not only is Nokia absent from the key Chinese RAN market, it is also struggling in North America due to lower volumes due to its reduced market share and price erosion, which is higher in North America than other parts of the world. In addition, the vendor expects significant currency headwinds during 2021.

On a more positive note, Counterpoint believes that Nokia has a very competitive mid-band RAN portfolio and there could be some upside following the completion of the C-band auctions in the US. In Europe, Nokia is gaining market share due to the absence of Chinese vendors.

Although revenues declined 6% in the quarter, the vendor reported improving margins, including in its critical Mobile Access division, which Counterpoint Research attributes to lower RAN product costs due partly to good progress in transitioning from FPGA-to-SoC chipsets.  At the end of 2020, the conversion rate stood at 45%, ahead of Nokia’s 37% target. Although this transition to SoCs will not be completed until the end of 2022, Counterpoint expects that Nokia will have caught up with its rivals in terms of other 5G product developments by the end of 2021.

Profits in Sight at Ericsson’s Digital Services

Ericsson’s Networks business is going from strength to strength. However, the financial performance of its non-RAN businesses are not quite so healthy in margin terms. Revenues at Ericsson’s Digital Services unit, its second largest business unit, continued to decrease during 4Q 2020 due to a sales decline in its legacy portfolio, partially offset by sales growth in its cloud infrastructure products.

Exhibit 1: Comparison of Ericsson and Nokia Full Year 2020 Revenues by Region (includes all businesses).

In recent months, Ericsson has been investing heavily in accelerating the development of its cloud-native portfolio and boasts more than 36 cloud-native core contracts plus 106 orchestration contracts to date. With improving margins and revenues from these new product lines expected to start rolling in during 2021, Counterpoint Research believes that Ericsson is finally on the path to achieving profitability in its Digital Services division.

Non-RAN Promising for Nokia

Revenues at Nokia’s non-RAN businesses were mostly flat during 2020. However, there are encouraging signs that 2021 will be a better year. Nokia’s non-RAN businesses, particularly the IP routing, fixed access and core network software technologies are held in high esteem by MNOs. For example, IP routing recorded its best quarter  on a constant currency basis since the acquisition by Alcatel-Lucent in 2013 with the FP-4 routing platform securing wins with big name customers. The Fixed Access recently launched its 25G PON solution and Nokia expects cost reductions during 2021 in its optical networks unit following the acquisition of Elenion Technologies. In addition, its Alcatel submarine cable business had a record order book of $1.7 billion at the end of 2020.

With lower product costs and new products coming on stream, coupled with the absence of Chinese rivals in several markets, Counterpoint Research believes that Nokia’s non RAN businesses will perform better during 2021 and offset the expected weak performance in the Mobile Access unit.

Related Posts

Ericsson Accelerates while Nokia Restructures

Nokia – Is the Turnaround Still on Track?

Huawei UK Ban – Implications and Options for Operators

 

 

Gareth has been a technology analyst for over 20 years and has compiled research reports and market share/forecast studies on a range of topics, including wireless technologies, AI & computing, automotive, smartphone hardware, sensors and semiconductors, digital broadcasting and satellite communications.

Term of Use and Privacy Policy

Counterpoint Technology Market Research Limited

Registration

In order to access Counterpoint Technology Market Research Limited (Company or We hereafter) Web sites, you may be asked to complete a registration form. You are required to provide contact information which is used to enhance the user experience and determine whether you are a paid subscriber or not.
Personal Information When you register on we ask you for personal information. We use this information to provide you with the best advice and highest-quality service as well as with offers that we think are relevant to you. We may also contact you regarding a Web site problem or other customer service-related issues. We do not sell, share or rent personal information about you collected on Company Web sites.

How to unsubscribe and Termination

You may request to terminate your account or unsubscribe to any email subscriptions or mailing lists at any time. In accessing and using this Website, User agrees to comply with all applicable laws and agrees not to take any action that would compromise the security or viability of this Website. The Company may terminate User’s access to this Website at any time for any reason. The terms hereunder regarding Accuracy of Information and Third Party Rights shall survive termination.

Website Content and Copyright

This Website is the property of Counterpoint and is protected by international copyright law and conventions. We grant users the right to access and use the Website, so long as such use is for internal information purposes, and User does not alter, copy, disseminate, redistribute or republish any content or feature of this Website. User acknowledges that access to and use of this Website is subject to these TERMS OF USE and any expanded access or use must be approved in writing by the Company.
– Passwords are for user’s individual use
– Passwords may not be shared with others
– Users may not store documents in shared folders.
– Users may not redistribute documents to non-users unless otherwise stated in their contract terms.

Changes or Updates to the Website

The Company reserves the right to change, update or discontinue any aspect of this Website at any time without notice. Your continued use of the Website after any such change constitutes your agreement to these TERMS OF USE, as modified.
Accuracy of Information: While the information contained on this Website has been obtained from sources believed to be reliable, We disclaims all warranties as to the accuracy, completeness or adequacy of such information. User assumes sole responsibility for the use it makes of this Website to achieve his/her intended results.

Third Party Links: This Website may contain links to other third party websites, which are provided as additional resources for the convenience of Users. We do not endorse, sponsor or accept any responsibility for these third party websites, User agrees to direct any concerns relating to these third party websites to the relevant website administrator.

Cookies and Tracking

We may monitor how you use our Web sites. It is used solely for purposes of enabling us to provide you with a personalized Web site experience.
This data may also be used in the aggregate, to identify appropriate product offerings and subscription plans.
Cookies may be set in order to identify you and determine your access privileges. Cookies are simply identifiers. You have the ability to delete cookie files from your hard disk drive.