Nokia’s latest results highlighted the challenging economic conditions the wider telco industry is facing as Communication Service Providers (CSPs) have trimmed infrastructure investment, but the enterprise sector is seeing the potential of investing in 4G and 5G connectivity and applications.
Registered users can unlock up to five pieces of premium content each month.
Log in or register to unlock this Insight.
Challenging Economic Times
Nokia’s financial results came out in late July 2023. Net sales at €5.71 billion were slightly down -3% Year-over-Year (YoY). Profit for the period stood at €289 million compared to €460 million for the same quarter a year ago. Wider market conditions were cited for the results, especially in relation to a significant decline in major North American operators' investments. However, Nokia’s senior management trumpeted performance in its Enterprise division as a highlight with net sales increasing by 27% on a constant currency basis. Nokia reported continued strong growth in both enterprise and webscale customer acquisition with more than 635 private wireless customers and 90 new Enterprise customers.
Nokia has very much embraced the opportunities in Industrial 4.0, not just with supplying small cells, gateways, and access points, but also building a development platform and ecosystem that harnesses the capabilities of third-party software developments and system integrators. Nokia’s on-premises Mission Critical Industrial Edge (MXIE) compute solution provides that platform. In the West, Nokia has brought onboard Siemens and Zscaler. Siemens’ MindConnect Software Agent on MXIE helps deliver seamless connectivity between industrial assets and systems, while Zscaler Private Access brings zero-trust security to MXIE to secure mission-critical edge workloads, Operational Technology (OT), and Industrial Internet of Things (IIoT) systems. Nokia has also been busy in Asia bringing onboard solution providers.
Targeting Asia for 5GtoB Growth
Clearly Asia is a significant market for Industrial 4.0 opportunities. Asia-Pacific represented nearly 40% of the global Gross Domestic Product (GDP) in 2022. In its own right, the Asia-Pacific manufacturing sector represents ~US$8 trillion (YoY 4.2%), which is effectively half of global manufacturing revenue. Nokia has been cultivating Industry 4.0 relationships in Asia, notably in Japan. In December 2020, Nokia announced it had formed a Nokia Local 5G Technology Partnership, a strategic alliance involving Conexio, Hitachi Kokusai, NS Solutions (a subsidiary of Nippon Steel), Omron, and Sharp, to promote the adoption of 5G-based enterprise industry solutions in Japan. Key components of the platform include Nokia’s Digital Automation Cloud (NDAC) solution—a compact, plug-and-play private cloud system with automation enablers—and its Nokia Modular Private Wireless (MPW) architecture.
Factory, warehouse, logistics managers, and even retail and healthcare institutions are implementing Industry 4.0 solutions to improve productivity and make them more agile. If a company is leveraging advanced use cases, such as Autonomous Mobile Robots (AMRs), Autonomous Haulage Systems (AHSs), and zero-fault manufacturing, the amount of data generated is growing exponentially and, ideally, the data must be processed in real time. Even if the data need to travel just a few hundred kilometers to the local cloud, it can create delays of several milliseconds, which can have an operational impact. Nokia has also positioned MXIE, Nokia’s MX Industrial Edge solution, to process data at the source in real time, while retaining data sovereignty. Cloud-native and virtual machine-based applications that are supported by Nokia’s MXIE platform include:
- Video Analytics: Nokia Scene Analytics uses Artificial Intelligence (AI) and Machine Learning (ML) to remotely monitor multiple video feeds from cameras connected to the private wireless network.
- Mixed Reality (MR): Taqtile's Manifest platform enables real-time delivery of work instructions to deskless team members' workpads.
- Critical Team Communications: Nokia Team Comms and Nokia Group Comms enable push-to-X, voice, and video for greater situational awareness.
- Tracking and Positioning Applications: Nokia High Accuracy Indoor Positioning (HAIP) use geo mapping to track assets indoors across large spaces.
- Industrial Connectors: Nokia has partnered with leading industrial automation companies like PTC and Siemens to onboard their industrial connectivity software solutions to MXIE.
- Webscale Connectors: These provide access to hyperscaler and industrial edge cloud applications and Operational Technology (OT) data in the public cloud, such as Microsoft Azure IoT Edge.
- Nokia Integrated Operations Center: This provides a single pane of glass view to intelligently control and manage a mix of Internet of Things (IoT) and non-IoT data sources, systems, applications, and analytics engines.
- Autonomous Robot and Vehicle Capabilities: Enterprises can connect AMRs and the Nokia drone network securely and effectively over MXIE.
- OT Security: Zscaler Private Access brings zero-trust security to MXIE to secure mission-critical edge workloads, OT, and IIoT systems.
Nokia Local 5G Technology Partners, such as NS Solutions, have reported traction in the 5G-to-Business (5GtoB) market. To date, the system integrator has chalked up over 20 5GtoB deployments. Recent deployments include a remote crane implementation, nsraven, and NS Solutions deployed a private cellular network for the Nara Institute of Science and Technology (NAIST) to enable High-Definition (HD) live streaming of lectures and research videos and contribute to research on next-generation mobile communication systems.
5GtoB Outlook Bright, But the Business Case Must Be Justified
The 5GtoB market is very much building up momentum. In addition to Japan, ABI Research is also witnessing 5GtoB deployments in China, South Korea, and Southeast Asia. For most mission-critical applications, businesses are very likely to keep their traffic “on-premises” like NAIST, but ABI Research does anticipate seeing some firms, perhaps Tier Two or Tier Three firms that do not have in-depth Information Technology (IT) expertise or personnel, using network slicing, which uses the wide area cellular assets of their national telco. ABI Research forecasts that 5G network slicing revenue in the Asia-Pacific region will experience an upward trajectory at a Compound Annual Growth Rate (CAGR) of 116% and reach US$10.1 billion by 2027, up from US$0.4 billion in 2023. The vertical that will experience the largest growth will be logistics, followed by industrial manufacturing, expected to rake in US$2.59 billion and US$2.53 billion, respectively, by 2027. Looking at the Asia-Pacific region’s forecasts for private cellular networks, on the other hand, ABI Research anticipates the market will grow at a CAGR of 53%, up to US$7.52 billion by 2027, from US$1.37 billion in 2023. Specifically, the manufacturing industry is expected to draw the largest proportion of revenue, reaching US$2.71 billion by 2027.
There is still a considerable amount of “awareness building” needed. Competition between equipment vendors and system integrators will continue to bring down the cost of equipment and expand the capabilities of the solutions. Another reality is that enterprise owners will also be evaluating the lifecycle costs versus potential Return on Investment (ROI) of these 5GtoB solutions and will not be rashly swapping out equipment. The potential of 5GtoB will need to be justified. Enterprises should gain a robust understanding of the Total Cost of Ownership for the solutions and then delineate the ROI expectations. ROI can reflect Capital Expenditure (CAPEX), Operational Expenditure (OPEX), productivity gains, as well as reduced downtime, etc. ABI Research can provide insight into those metrics.