5G and Beyond

Samsung in battle to be seen as European 5G contender

When seven enthusiastic vendors were last year measured on their ability to provide more open and interoperable 5G products, the results threw up a surprise.

Conducted by the Facebook-led Telecom Infra Project (TIP), an industry group determined to spur innovation in the network equipment market, the request for information (RFI) sought to figure out compliance with open RAN (for radio access network).

With its open interfaces, the in-vogue technology promises a pick-and-mix approach to building networks, allowing operators to combine different suppliers. It is a rejection of mainstream standards that tie any customer to one vendor's system.

The natural assumption is that an open RAN specialist would have come out top. Companies including Altiostar, Mavenir and Parallel Wireless are evangelical about the new technology. Overtly hostile to the "closed" interfaces used today, all responded to the RFI.

But the company that stood out from the pack was a much larger business with a hand in mainstream network technologies: South Korean electronics giant Samsung.

Table 1: Samsung at a glance (2019 figures)

Revenues $197.7 billion
Gross profit $71.4 billion
Operating profit $23.8 billion
Net profit $18.7 billion
Network revenues estimate $3.0 billion
R&D budget $16.8 billion
Number of employees 105,257
Major 5G customers Korea Telecom (South Korea), LG Uplus (South Korea), SK Telecom (South Korea), Telus (Canada), Videotron (Canada), Spark (New Zealand) AT&T (USA), US Cellular (USA), Verizon (USA)
Source: Samsung, Light Reading, news reports.

Announced in November, the RFI results were the latest boost for a company eager to establish itself as a 5G alternative to Huawei, Ericsson and Nokia, the dominant providers in today's mobile infrastructure market. As service providers scout for alternatives to the "big three," and China's Huawei faces growing resistance from European officialdom, Samsung is parading its credentials.

Huawei's pain already appears to have been Samsung's gain in a couple of important international deals. In Canada, where authorities are under US pressure to ban Chinese vendors, it was recently named as a 5G supplier to Telus, which previously built its 4G network with Huawei's support. Samsung also became the 5G choice for New Zealand's Spark after it was warned off using Huawei by its regulator.

Unsurprisingly, Samsung is already the dominant player in its domestic market, supplying more than half the 5G network equipment used by the country's three network operators.

Huawei's long-running absence from the US has also opened up an important 5G role for Samsung there. Last week, Verizon was forced to play down speculation that Samsung was even squeezing out Nokia in its 5G deployment.

But the South Korean vendor's position in other big markets, including most of Europe, has remained weak. That partly reflects earlier concern Huawei's problems could turn out to be short-lived, says Daryl Schoolar, an analyst with Omdia.

"They did not want to make a major investment in people and time in Europe just to have the political situation change on them as soon as they were ramping up," Schoolar tells Light Reading.

Samsung's other problem has been the various technical and economic barriers to replacing an incumbent vendor in an existing network.

Stefan Pongratz, an analyst with Dell'Oro Group, blames its lack of success in Europe on "the difficulty of coming up with a compelling business case without an entry point catalyst in brownfield settings." In one that is "greenfield," such as the 4G network recently built by India's Reliance Jio, Samsung is easier to introduce.

One major issue has been the popularity within Europe of so-called "single RAN" technology. Pioneered by Huawei, these single RAN systems can run all the different generations – 2G, 3G and 4G – on the same platform, promising convenience and cost savings for operators.

Unfortunately, they mean that any 4G replacement must bring 2G and 3G capabilities, and Samsung has neither.

Those legacy shortcomings largely explain why UK operators have not seen Samsung as a viable option.

"The key point is the single RAN concept and the 2G and 3G legacy," said Howard Watson, the chief technology officer of BT, during a parliamentary committee last week. "Right now, 50% of my voice calls still use the 2G and 3G network … My view right now is that for a replacement technology today, 2G has to be a critical part of the solution."

Mood change
Samsung acknowledges it has had more success in countries where operators are less reliant on legacy technologies. But it also thinks market sentiment in Europe is changing for the better.

"European operators are getting rid of their single RAN requirements," says Thomas Riedel, the head of Europe for Samsung Networks. "The idea of 'one vendor per site,' which prevented diversity of vendors and contributed to a lock-in of the big incumbents, is shifting toward openness."

The confidence stems from Riedel's observation that several European operators are now considering a 5G "overlay," instead of an upgrade with an existing 4G vendor. If his optimism is justified, the development could be a game changer for Samsung, establishing it as a serious 5G rival to the "big incumbents."

The overlay would take advantage of an interface called X2, supporting handover between 4G equipment from one vendor and 5G kit from another. Although standardized by the 3GPP, the mobile industry's main specifications body, X2 has never been implemented by the big vendors, say their critics.

"You try to get Nokia and Ericsson to turn it on," grumbles John Baker, the senior vice president of business development for Mavenir. This market "abuse," he says, partly explains why operators must use their 4G vendors when buying 5G equipment.

For Samsung, a fully opened X2 interface would be an easier way into European networks than via a full-blown open RAN offer, according to Woojune Kim, Samsung's global head of sales for networks.

"In Korea, we showed you could put a 5G network on top of another vendor's 4G network and it works perfectly well," he told the UK's parliamentary committee.

Building a 5G overlay, said Kim, will be even easier with a newer "standalone" version of 5G technology, less reliant on the old 4G systems than the "non-standalone" 5G networks that many operators are currently erecting.

Yet Vodafone, one of Europe's biggest service providers, is unconvinced.

"If I take an overlay to existing 4G it is not an immediate process," said Andrea Donŕ, the head of networks for Vodafone UK, during the same parliamentary session. "I need to build 5G coherently with the 4G stack I have to maintain the customer experience."

Even with standalone technology, said BT's Watson, an operator building an overlay would need far more 5G spectrum than is available in Europe to guarantee top-notch services.

Gabriel Brown, a principal analyst with Heavy Reading, is equally skeptical.

"You need to have lowband spectrum to provide coverage," he says. "If you have lowband spectrum, you really want to use 4G and 5G at the same time, so you can't really separate the systems."

South Korea, says Brown, is currently the only market whose operators are trying to build a 5G network without using lowband frequencies.

Halting progress
Progress has been halting for Samsung.

Two years ago, the company set a target of capturing 20% of the world's 5G market by the end of this year. At the end of 2019, it was able to boast a 34% share based on momentum in South Korea, but the figure is currently anywhere between 14% and 20%, Kim told UK politicians last week. In the overall RAN market, he claims a 10% share of business.

"We estimate the rate of share acceleration is subsiding," says Dell'Oro's Pongratz, partly because Chinese operators are now "moving ahead at full throttle."

Dell'Oro's latest estimate is that Samsung had about 3.2% of total telecom equipment revenues in the first quarter of this year, up from 1.5% in 2016.

"It will be interesting to see how this will unfold going forward, as Samsung is announcing more 5G wins outside of the Korean market," says Pongratz.

Samsung will not disclose details of its network revenues, but the various market share figures when combined with Dell'Oro's numbers suggest it currently makes about $3 billion a year.

For authorities and operators seeking an alternative to Huawei and its Nordic rivals, that figure may create doubt that Samsung has the necessary R&D muscle to be an effective substitute. Huawei last year had an R&D budget of about $18.8 billion, while Ericsson's was about $4.2 billion.

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Quizzed by UK officials, Kim was unable to say how much Samsung invests in networks R&D annually. The overall budget for Samsung Electronics, however, is about $16.8 billion.

"It is spread across multiple things, but all are relevant to 5G," said the executive. "Investment-wise, we are more than capable of matching everyone else in the world."

Riedel insists the 5G "budget portion" is high when compared with rivals' spending.

Despite the various barriers it must overcome, Samsung is quite possibly the safest non-Nordic bet for European countries suddenly averse to Chinese vendors.

For all 2G's current usefulness, few new entrants to the equipment market will be persuaded to start investing in a legacy technology, leaving operators with the same issue when dealing with most other suppliers. Costly and time-consuming "swaps" seem to be the only alternative to building an overlay.

As demonstrated by the TIP RFI, Samsung's technology expertise is not in doubt. Its position as one of the world's biggest chipmakers arguably gives it a time-to-market advantage over rivals that do not have similar assets. Riedel says the company has been able to deploy smaller and more power-efficient 5G basestations for its customers thanks to its in-house semiconductor expertise.

He also claims to have developed software that can now run on general-purpose X86 processors, a feature that operators are demanding as they make open RAN a priority.

In the event of a Huawei ban, perhaps the biggest question is whether regulators and service providers would be satisfied with a Nordic duopoly comprising Ericsson and Nokia.

Conscious of the decisions facing policymakers, Kim is eager to portray Samsung, with its $200 billion in annual revenues and $100 billion in cash, as a way to "de-risk" the market.

"Operators today are looking for vendor diversity," he told UK officials last week. "You also want a financially stable vendor, because over the last 20 years the industry has been brutal."

If technical challenges remain an impediment to Samsung's progress, a Nordic duopoly may be what some European service providers will soon encounter.

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— Iain Morris, International Editor, Light Reading

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