The barren years are forecast to end as 5G profits close in

Research from Gartner suggest the 5G spending boom is almost within the grasp of the beaten and battered vendors, with 5G infrastructure spend set to increase by 89% over the next 12 months.

The last three to four years have been a frustrating time for most of the network infrastructure vendors. Those selfish telcos halted the lavish spending on 4G infrastructure, choosing to try and muscle some ROI to keep investors happy, while 5G has seemingly been hovering on the horizon for an age and a day.

“5G wireless network infrastructure revenue will nearly double between 2019 and 2020,” said Gartner’s Sylvain Fabre. “For 5G deployments in 2019, CSPs are using non-stand-alone technology. This enables them to introduce 5G services that run more quickly, as 5G New Radio (NR) equipment can be rolled out alongside existing 4G core network infrastructure.”

Gartner is forecasting 5G spend from the CSPs will increase to $2.2 billion over the course of 2019, up from $612 million last year. In 2020, this number will jump 89% to $4.1 billion and then up-to $6.8 billion in 2021. There will of course be a significant spend on maintaining and improving 4G networks, though the vendors will want to gain returns on 5G R&D sooner rather than later.

The next two years are expected to be an increasingly aggressive scrap between the network vendors to secure valuable 5G contracts. With early launches of 5G networks in the UK, US, South Korea, Italy and Switzerland (amongst others) taking place this year, there will be a horde of fast followers over the next 12-18 months, before everyone else starts to catch-up.

These deployments will of course be focused on the larger cities to start with, though it won’t be long before some telcos start scaling. However, what is worth noting is the nationwide deployment of 5G will not be as fast as previous ‘Gs’.

“To maintain average performance standards as 5G is built out, CSPs will need to undertake targeted strategic improvements to their 4G legacy layer, by upgrading 4G infrastructure around 5G areas of coverage,” said Fabre. “A less robust 4G legacy layer adjoining 5G cells could lead to real or perceived performance issues as users move from 5G to 4G/LTE Advanced Pro.”

Although 4G spend will also increase to prepare the underlying networks for 5G, few of the vendors will complain as long as the dollars start flowing into their banks accounts not out of them. It does appear the barren years might be coming to a close.

And for the network vendors, the moment of 5G euphoria will bring with it a sense of relief, as you can see from the financial figures below.

2015 2016 2017 2018
Huawei Revenue 55.736 73.594 85.171 105.191
Net income 5.208 5.228 6.695 8.656
Ericsson Revenue 25.56 23.04 21.26 21.82
Net income 1.42 0.2 (0.65) (3.35)
Nokia Revenue 29.537 26.583 25.697 25.049
Net income 3.205 2.411 0.017 (0.065)
Cisco Revenue 12.8 12.6 12.7 12.8
Net income 2.3 2.8 2.4 3.8
ZTE Revenue 14.136 14.284 15.353 12.066
Net income 0. 527 (0.198) 759 (0.98)
Juniper Revenue 4.857 4.990 5.027 4.647
Net income 0.633 0.601 0.306 0.566

Figures in US Dollars (Billions), taken from Annual Reports

It is also worth noting that some of the numbers in this table are slightly misleading. For example, during the period above Huawei’s smartphone business surged, while Nokia’s numbers also include fixed line revenues. We’re not exactly comparing apples with apples; however, you can see there is a general slow-down across the vendor community.

Aside from a few exceptions, many of the figures above are not the end of the world. Executives will point to over-arching trends and suggest that while there is no growth, maintenance of revenues (or managing a slight decrease) is an acceptable performance. However, this cannot go on forever.

The likes of Rajeev Suri at Nokia or Chuck Robbins at Cisco have been keeping themselves employed by pointing towards the 5G bonanza. The telcos are sweating 4G assets for ROI while making preparations for the world of 5G; profits are on the horizon for many of these firms, they just need to hang-on a little bit longer.

You do get the impression some investors are starting to get a bit frustrated with the continued quest through the barren connectivity desert, though if Gartner is to be believed, there is an Oasis forming on the horizon. Let’s hope

Huawei holds onto number two smartphone spot… for the moment

Huawei has held onto the number two spot for smartphone shipments during the first quarter of 2019, but storm clouds are gathering on the horizon.

According to estimates from Gartner, Samsung is leading the smartphone manufacturers owning 19.2% of market share over the first three months, though Huawei is closing the gap with 15.7%. All three Chinese brands in the top five grew market share over the period, with Apple also declining to 11.9%, shrinking in the Huawei shadow.

Brand Q1 2019 market share Q1 2019 shipments Q1 2018 market share Q1 2018 shipments
Samsung 19.2% 71.6 million 20.5% 78.5 million
Huawei 15.7% 58.4 million 10.5% 40.4 million
Apple 11.9% 44.5 million 14.1% 54 million
Oppo 7.9% 29.6 million 7.3% 28.1 million
Vivo 7.3% 27.3 million 6.1% 23.2 million
Others 37.9% 141.4 million 41.5% 159 million

This might look very promising for the under-fire Chinese vendor, but it does seem the joy might be short-lived. While European and Asian governments are keen not to ban the vendor from selling smartphones or infrastructure equipment in their markets, they might not be able to stem consumer fears.

The anti-China rhetoric might not be anywhere near the same levels as in the US, but consumers will not be keen to invest in a substandard product. This might be the case moving forward, should Huawei remain on the ‘Entity List’, effectively banning it from working with any US firms, including Google.

The prospect of an Android-less Huawei device, and a home-grown operating system to replace it, has been much discussed, but soon enough the reality will hit home with consumers. Without support for popular Google-owned applications, experience will soon drop. Huawei might be able to provide a suitably effective alternative, but not being able to access Google’s apps and services will turn off some consumers.

One of the issues Huawei will face is that of the unknown. Huawei’s OS might be perfectly good, but no-one knows. It might have the supporting ecosystem, but no-one knows. It might be able to create apps to rival Google offerings, but no-one knows. Asking cash-conscious consumers to spend so much on so many unknowns will be a very difficult task.

This might not have an impact on Huawei’s biggest market, China, where the firm controls around 29% market share for smartphones, but Europeans are Google obsessed. This is Huawei’s second biggest region, representing 69% year-on-year growth for the first quarter, and one which represents more opportunity for growth. The US friction could put a severe dent in the consumer unit’s ambitions.

For Apple, it seems its traditional business is becoming increasingly competitive. There will of course be several reasons for this, namely a lack of innovation in recent years and extortionate prices, but there might be a glimmer of hope on the horizon.

As it stands, the misery is likely to continue over the next couple of months. With 5G phones hitting the shelves, early adopters may well snub their loyalties to experience the connectivity euphoria. Apple will not release a 5G-compatible device until 2020, but by missing out on the first wave it will learn the pitfalls of rival launches.

The second-wave of devices, Apple will be a front-runner in this one, will likely be where we see the greatest progress. The bugs and shortfalls will be identified and corrected, and there might well be some applications to make use of the data headroom which is created through 5G. There will also be more attractive tariffs available, with prices driven down by competition. These factors will push 5G into greater market adoption.

It might also recapture the loyalties of faltering iLifers…

Winning in the market share rankings today is certainly something to shout about, however success needs to be maintained over the next 12-18 months. Once 5G is pushed out to the mass market, there will be plenty of opportunities to sell extortionately priced devices. Apple appear to be aiming at this second-phase of 5G devices, building with the consumer hype, while Huawei will have to navigate the stormy seas.

If US tension forces Huawei devices out of consumer hands before the 5G device refreshment cycle, it might just miss out on the bigger prize.

Gartner claims people are warming to AI

The power of artificial intelligence is unquestionable, but what remains unknown is how long it will take for the technologies to be considered mainstream. Are people afraid of the power of AI?

With every technological breakthrough it takes a considerable amount of time for mainstream adoption. There are of course early adopters who will reap the benefits of AI, but bell curves exist for a reason; the vast majority will be slow to react, scared of the unknown, resistant to any form of change or dismissive of the benefits. Despite this pretty much being an inevitability, Gartner is confident adoption is going pretty well.

“Four years ago, AI implementation was rare, only 10% of survey respondents reported that their enterprises had deployed AI or would do so shortly,” said Chris Howard of Gartner. “For 2019, that number has leapt to 37% – a 270% increase in four years. “If you are a CIO and your organization doesn’t use AI, chances are high that your competitors do, and this should be a concern.

“We still remain far from general AI that can wholly take over complex tasks, but we have now entered the realm of AI-augmented work and decision science – what we call ‘augmented intelligence’.”

This is where some of the biggest benefits can be realised according to Gartner. With a continued shortage of IT skills (and also in some niche/highly qualified professions) throughout the world, AI can be introduced to ensure the chasm of ability does not negatively impact revenues. How this idea has been implemented across the ecosystem does seem to vary quite considerably.

The research indicates 52% of telcos have deployed chatbots to assist with customer service operations, while 38% of healthcare providers rely on computer-assisted diagnostics. Fraud detection and IT security are other areas which have seen AI implementation, while the breadth of services will only increase across 2019. With the smart home, and smart speakers in particular, becoming increasingly normalized in the eyes of the consumer, this looks like a blossoming space.

Interestingly enough, today also marks the day the UK Office of National Statistics unveiled employment numbers for the year. The number of people now employed in the UK has reached an all-time high of 32.54 million, while the number of job vacancies rose by 10,000 to a record 853,000. Although the early adopters, those with extraordinary technology ambitions, will focus on the added value benefits of AI there will of course be those who use such a breakthrough to reduce headcount.

This is the reality of AI which we will have to meet head on. Jobs will be replaced by automation and software, people’s livelihoods will be made redundant, unless retraining is offered. But, for retraining to be a realistic ambition first there has to be an acceptance of the negative consequences of AI.

The Fourth Industrial Revolution will be incredibly painful for some, but industry and politicians don’t seem to want to admit this, instead just focusing on the benefits. Every Industrial Revolution has been painful for those who have not adapted for the future, but somehow the rhetoric seems to be this one will be different. Putting PR spin on the issue will not help in the long-run, we need to be realistic.

AI is going to take over the world, just not the way you think

New estimates from Gartner put the total business value derived from artificial intelligence at $1.2 trillion in 2018, a year-on-year increase of 70%, before booming to $3.9 trillion in 2022.

The rise of AI in the business world has been well documented, though the real-world impact might not have been noticed by everyone. Technology companies are experts at incrementally feeding us progress to ease the transition to normality, therefore these figures might come as a shock to some. AI sounds incredibly futuristic, but according to Gartner, it is here.

“AI promises to be the most disruptive class of technologies during the next 10 years due to advances in computational power, volume, velocity and variety of data, as well as advances in deep neural networks (DNNs),” said John-David Lovelock, research vice president at Gartner.

“One of the biggest aggregate sources for AI-enhanced products and services acquired by enterprises between 2017 and 2022 will be niche solutions that address one need very well. Business executives will drive investment in these products, sourced from thousands of narrowly focused, specialist suppliers with specific AI-enhanced applications.”

2017 2018 2019 2020 2021 2022
Business Value 692 1,175 1,901 2,649 3,346 3,923
Growth (y-o-y) N/A 70% 62% 39% 26% 17%

Forecast of Global AI-Derived Business Value (Billions of US Dollars)

We’ve already seen the first signs of AI when it comes to the digital economy and targeted advertising. Although this might be simple in comparison to the usecases of tomorrow, it has already driven incredible value for the technology community. Just ask the likes of Facebook, Google and Amazon, all of whom have profited off advanced data science, predictive analytics and machine learning. It is by no means perfect, but the first steps never are.

Looking specifically at the telco space, machine learning and rule-based automation technologies are starting to appear in the way networks are managed, while AI is becoming a hot-topic when it comes to customer service and experience. Vodafone is one company which has been leading the way through the introduction of AI into customer interactions, TOBi, though this is a trend which will become much more common over the coming years and months. This will only be the start however.

Looking at the areas where AI will contribute in the future, Gartner predicts decision support/augmentation (such as DNNs) will represent 36% of the global AI-derived business value in 2018, a figure which will increase to 44% by 2022. Virtual agents, such as in customer services, account for 46% of the global AI-derived business value in 2018 and 26% by 2022, by which time other usecases will begin to mature.

Automated tasks and optimising business processes is one which might worry those in the workplace, but for those organizations which are feeling the pinch of lower profitability, these trends cannot emerge soon enough. This is an area which is potentially very contentious and damaging to society on the whole, as this is when we start talking about redundancies. Translating voice to text and vice versa, processing handwritten forms or images, and classifying other rich data content not readily accessible to conventional systems, could make numerous low-skilled worker redundant. Gartner predicts this area of AI could grow to 16% of all business value derived from AI in 2022, up from 2% today.

Don’t expect a violent rebellion of AI driven machines, they will just make us all unemployed. It’s more of a white-collar, middle-class uprising.