Asia-Pacific’s 5G CAPEX Slowdown: What Are the Next Big Opportunities?

In July 2024, Ericsson reported a 44% Year-over-Year (YoY) decline in sales in 2Q 2024 in Southeast Asia, Oceania, and India, which was primarily due to reduced CAPEX spending by Indian Communication Service Providers (CSPs) Reliance Jio and Bharti Airtel. Following last year’s rapid deployments of 5G networks in India’s market, the anticipated slowdown in spending on 5G equipment has been impacting Ericsson. As a result, the vendor’s revenue has fallen from US$1.3 billion (13.8 billion crowns) in 2Q 2023 to US$710 million (7.7 billion crowns) in 2Q 2024. On a more positive note, there was 14% growth in North America, which led to a smaller-than-expected 7% overall drop in revenue, from US$5.9 billion (64.4 billion crowns) to US$5.5 billion (59.9 billion crowns).

Among the long list of challenges, such as the fall in customer investment levels and competitive price wars from rivals, the slow adoption of 5G Standalone (SA) networks globally remain a large stumbling block for Network Equipment Vendors (NEVs). This comes as CSPs continue to grapple with key concerns, such as:

• High CAPEX Costs: Deploying 5G SA requires significant investment in new infrastructure, including base stations, core networks, and supporting technologies.
• Integration Challenges: The transition to 5G SA involves complex technical challenges, such as integrating the new technologies with existing systems and software, to ensure compatibility, performance, and reliability.
• Return on Investment (ROI): The current market demand for 5G SA services may not justify the investment. Many consumers and businesses still rely on 4G or 5G Non-Standalone (NSA) networks, which are functioning adequately. Moreover, substantial investments have already been made in these existing networks, making companies hesitant to allocate resources where they cannot see short-term benefits. While NEVs have been attempting to communicate the value and use cases for 5G SA, the current lack of real-world case examples to show how 5G SA can deliver increased commercialization opportunities is a large stumbling block for CSPs.

According to Ericsson, although approximately 300 CSPs have launched their 5G networks, only around 50 of those networks are based on 5G SA architecture. This presents a significant hurdle that NEVs need to overcome to boost revenue.

To convince CSPs to adopt 5G SA networks, NEVs need to demonstrate the additional value that 5G SA networks can bring to CSPs. In particular, NEVs should intensify their efforts to showcase the real-world benefits, use cases, and business models to help justify and drive the adoption of this technology. Some of these include:

• Collaboration between NEVs and Industry Verticals to Leverage Network Slicing: One key feature of 5G SA networks is network slicing, which optimizes network performance and efficiency through customized allocation of network resources. Each network slice acts as an isolated end-to-end network tailored to meet the specific requirements of a particular application. Partnering with various industries to leverage network slicing will drive efficient operations and boost revenue opportunities. For instance, in the agriculture sector, Ericsson is collaborating with the U.S. National Science Foundation’s (NSF) Platforms for Advanced Wireless Research (PAWR) program to deploy its 5G SA network for rural agricultural research and precise agriculture applications. Use cases include connected robots, livestock monitoring with high-resolution cameras, and agriculture automation. Similar approaches can be implemented in industry verticals such as healthcare (connected ambulances and delivery drones), power grid management, manufacturing (smart factory connectivity), and education.
• Opportunity in Developing 5G SA Network Application Programming Interfaces (APIs): Network APIs are sets of protocols, tools, and definitions that enable software applications to interact with network services and components, facilitating communication and data exchange between different software applications and network infrastructure. Network APIs have the potential to speed up current applications and lay the foundation for new ones like remote equipment operation and Augmented Reality (AR) gaming. By facilitating these advancements, NEVs can establish themselves as crucial allies for enterprises looking to accelerate their digital transformation. In 2022, the Linux Foundation announced the CAMARA project to address industry API interoperability across various operators and cloud architectures, allowing applications to run consistently between telco networks and different countries. Greater emphasis can be placed on expanding and building out new 5G SA Network API capabilities to increase monetization opportunities.
• Investments in Emerging Technologies: By investing, exploring, and integrating emerging technologies such as Artificial Intelligence (AI), enhanced Fixed Wireless Access (FWA), next-generation Extended Reality (XR), and Non-Terrestrial networks (NTN) capabilities into 5G SA and 5G-Advanced networks, NEVs can maintain a competitive edge, anticipate industry trends, and foster innovation. These technologies can transform telecommunications by enabling faster networks, more intelligent services, enhanced security, and new revenue opportunities. Embracing these innovations early on can allow them to position themselves strategically in a rapidly evolving market to better meet the future demands of consumers and businesses.

Despite the current slow progress, ABI Research foresees strong potential for revenue growth to be driven by 5G SA deployments, with more than 120 operators having started on their journey to trial and test the technology. To capitalize on this opportunity, NEVs need to continue demonstrating the added value and advantages of their 5G SA solutions.