Telecom and Tariffs: The Challenges and Solutions

The Trump Administration’s tariff policy will require all goods imported into the United States to carry a 10% baseline rate. For some countries, such as China and Vietnam, tariff rates will be as high as 145%. The telecom industry relies on established supply chains to maintain the status quo costs of network equipment and components. Notably, 5G Radio Access Network (RAN) equipment will cost more to manufacture, which will typically be absorbed by end users at higher selling prices. To manage this economic instability, telco infrastructure vendors and mobile operators must shake up their supply chain playbook and technological focus.

How Telco Infrastructure Vendors Can Limit the Damage

With the new tariffs, private cellular infrastructure vendors must manage increased costs of production. Inevitably, they will be forced to mark up their prices to customers to maintain profitability. For example, hardware costs for RAN equipment and cellular core hardware will surge by up to 25%. Even more, the cost of network-related components like edge devices, cameras, and tablets will increase.

For small and medium businesses with limited budgets, the idea of investing in private cellular becomes less appealing when deployment costs are high. As a result, some businesses are putting 5G deployments on the back burner or abandoning pilot projects altogether. When facing macroeconomic headwinds, enterprises prioritize short-term profits over long-term digital transformation.

The Nokias and Ericssons of the telecom industry, priced out of the U.S. market, will have to offload their supply to other regions. This will reduce long-term profitability for these vendors as demand balances out.

For telco infrastructure suppliers to keep their heads afloat amid these treacherous waters, ABI Research Analyst Shadine Taufik provides the following strategic steps:

• Source Alternative Components: US.-based telcos should source small electronics from price-comparable manufacturing hubs like India to reduce deployment delays. At the same time, long-term reshoring plans should be developed, especially for components from China.
• Utilize Consumer-Grade Technology: Telcos can mitigate U.S. tariffs by incorporating consumer-grade technology in offerings, as demonstrated by Amazon Web Services (AWS).
• Partner with New Manufacturing Hubs: Non-U.S. telcos can leverage short-term infrastructure discounts and partner with manufacturing hubs in Latin America and Southeast Asia to create opportunities outside the United States.
• Target Emerging Markets: US.-based telcos can expand abroad by offering solutions with specific use cases, flexible payment plans, and affordable pricing. However, potential reciprocal tariffs may drive supply chain sourcing back to China.
• Highlight Total Cost of Ownership (TCO) and Return on Investment (ROI): Private cellular offerings should focus on clear returns and validated business cases, highlighting end-to-end applications. To achieve this, as-a-Service models should be implemented to emphasize quick deployment time, network automation, communication suites, and plug-and-play hardware.
• Prioritize Software and Virtualization: Telco infrastructure vendors should accelerate cloud-native networks, virtualized RAN, and core solutions. Concurrently, they must partner with hyperscalers like AWS and Microsoft Azure to reduce physical footprints, lower costs, and enable agile scaling.

Tariff Impact on 5G RAN Upgrades and Ways to Adapt

While tariffs on countries like Vietnam (46%), the European Union (20%), Japan (24%), and South Korea (25%) are paused for 90 days, the uncertainty is affecting RAN deployments.

For smaller vendors like Airspan and Mavenir, the increased equipment costs are a significant hurdle that threatens already struggling bottom lines. Unlike industry leaders Nokia and Ericsson, which benefit from stronger finances and U.S.-based manufacturing, smaller players often build equipment only after securing orders. This makes them less equipped to absorb tariff-related price hikes, putting them at a disadvantage when competing for contracts.

Table 1: Impact of U.S. Tariffs on RAN Components

Major U.S. telecom operators are unlikely to halt their 5G plans, but may delay infrastructure upgrades as they navigate reduced purchasing power. Price increases from vendors like Nokia and Ericsson, which are passing on higher component costs, are expected to push back key announcements planned for mid-2025. However, this challenge is also accelerating a shift toward network virtualization, as previously pointed out. By adopting software-defined RAN on Commercial Off-the-Shelf (COTS) servers, such as NVIDIA’s tariff-exempt DGX and HGX systems, operators can reduce reliance on costly proprietary hardware. This approach also opens new revenue streams, like offering GPU-as-a-Service for AI workloads at the network edge.

Despite the supply chain disruption, tariffs present a chance for mobile operators and vendors to adapt and innovate. Here are actionable steps to stay ahead:

• Accelerate Network Virtualization: Operators should collaborate with vendors to fast-track trials and strategies for virtualized RAN, leveraging COTS servers to minimize exposure to future tariffs.
• Diversify Supply Chains: Vendors must audit their sourcing strategies to identify tariff vulnerabilities and explore cost-effective alternatives. Relocating production to the United States, Mexico, or Canada could further reduce costs.
• Integrate with Virtual Platforms: Vendors should prioritize integrating their RAN software with platforms like NVIDIA’s Aerial RAN or Intel Xeon 6. This positions them to support operators’ virtualization goals and secure future contracts.

To learn more about how the new U.S. tariffs are shaping the technology landscape, download ABI Research’s whitepaper, Navigating Tariff Turbulence In The Technology Sector. In this paper, our analyst team identifies 21 ways that tariffs are impacting various technology segments, providing actionable insight to maintain profitability.