Samsung, a significant player in the Open RAN market, has faced challenges in the first quarter of 2024. Despite overall profit growth, its network revenues fell sharply. This decline, caused by the 5G winter, impacted Samsung’s performance compared to competitors like Ericsson and Nokia. The company’s network business reported a 31% year-over-year drop in revenue, reflecting a broader industry trend of reduced investment in 5G infrastructure.
Network Revenue Decline
Samsung’s network revenue decline is a critical issue. In Q1 2024, its network sales dropped to KRW 740 billion ($530 million) from KRW 1.08 trillion ($780 million) the previous year. This 31% drop is significant, especially when compared to Ericsson’s 19% and Nokia’s 37% declines. The decrease is attributed to a “capex squeeze” by telcos, who are cutting back on 5G investments after an initial surge.
Impact of Capex Cuts
The US and India, key markets for Samsung, have significantly reduced their capital expenditures. Verizon’s overall spending fell from $23.1 billion in 2022 to $18.8 billion in 2023. Similarly, India’s rapid 5G rollout has slowed, with reduced investments affecting vendors like Samsung. This slowdown has led to a drop in market share for Samsung, especially in regions where it previously held a strong position.
Challenges in Global Markets
Samsung faces challenges in expanding its market share in key regions. The company is effectively locked out of China, where Huawei and ZTE dominate. In North America, AT&T awarded a $14 billion contract to Ericsson, limiting Samsung’s opportunities. While Samsung has made some inroads with Canadian telco Telus, its growth prospects in North America remain limited.
Opportunities for Growth
Despite these challenges, Samsung has a comprehensive product portfolio that could drive future growth. Its offerings include RAN units, software for DUs and CUs, and a service management and orchestration platform. Samsung’s significant R&D investment, totaling KRW 28.34 trillion ($20.6 billion) in 2023, positions it well against competitors.
Samsung’s 5G network business faces significant challenges due to reduced capex investments by telecom operators. The company’s Q1 2024 revenue drop highlights the broader industry trend of declining 5G investments. However, Samsung’s comprehensive product portfolio and substantial R&D investments could help it navigate these challenges and find new growth opportunities in the future.
Source: Light Reading
