Component shortages and supply chain troubles have affected a wide range of areas in the telecom industry, from fiber network buildouts to the availability of smartphones.
But so far, mobile network operators in the US have said that their core efforts – the construction of speedy midband 5G networks – have remained unaffected.
"There are, of course, challenges in supply chain," Verizon CEO Hans Vestberg said last month on the company's earnings call, in response to a question on the topic, according to Seeking Alpha. "I think our team is the most outstanding operation excellence team in the world and they are getting around all of it. On all major equipment, radios, et cetera, that's already secured ... I mean, we do long-term planning with our suppliers years back, so we feel really good about that."
But there are indications that the situation could change in the coming months.
"Supply related risks in RAN [radio access network] equipment, they have increased somewhat," noted analyst Stefan Pongratz with research and consulting firm Dell'Oro Group, in comments last week to Light Reading. "It could get worse before it improves."
Troubles in the supply chain first cropped up earlier this year. Electronics companies ranging from video game console makers to automobile suppliers reported difficulties in obtaining some lower-end chipsets for their products. More recently, the issue has been exacerbated by shipping delays, staffing issues and other problems.
Then, during the summer, the situation began dragging at different parts of the telecom industry. Equipment suppliers like Adtran began warning about dwindling product supplies. Smartphone vendors like Samsung couldn't keep shelves stocked. And service providers like AT&T were forced to reduce their fiber network expansion plans.
But 5G carriers like T-Mobile, AT&T and Verizon have all so far reported that their massive midband 5G network buildouts remain on track for this year. That's important considering the companies collectively have spent more than $100 billion on that upgrade effort. That spending stretches across 5G radios, spectrum licenses and space on cell towers.
But there are indications that component shortages, shipping delays and other supply chain issues will have a significant impact on the supply of midband 5G equipment throughout the remainder of 2021 and – especially – into 2022.
5G vendors begin sounding the alarm
"We had significant challenges in the third quarter," reported Airspan CEO Eric Stonestrom, according to a Seeking Alpha transcript of the company's earnings call earlier this month.
Airspan is a relatively small 5G radio equipment supplier whose customers include Japan's Rakuten. Stonestrom said the company delayed $20 million in product shipments in the third quarter due to supply chain troubles. He blamed Airspan chipset suppliers, including Qualcomm, Intel and Skyworks, for the issue.
"If parts are coming in with a seven- or eight- or nine-month lead time that used to come in with a twelve- or sixteen-week lead time, that requires a lot more thinking in terms of our build plan for the year," he explained.
Stonestrom predicted the situation could force Airspan to delay up to $40 million in shipments during the fourth quarter.
And Airspan isn't the only 5G hardware supplier to warn about delays in shipping its products.
"We've taken very proactive efforts and we have built inventory and created in a way a flexible supply situation," Ericsson CEO Borje Ekholm said on the company's earnings call last month, according to a Seeking Alpha transcript. Ericsson is one of the world's biggest 5G network equipment suppliers. "But late in the third quarter, we saw some impact on shortages of individual components."
And Nokia – another major 5G hardware vendor – reduced its overall "addressable market" to 5%, down from 6%, specifically because of supply chain headaches.
The warnings from the vendors are important considering all of the big 5G network operators in the US primarily obtain their network equipment from the likes of Nokia, Ericsson and Samsung. Product delays by one or more of those vendors will undoubtedly slow the construction of midband 5G in the US.
"It's definitely something to keep in mind," said Pongratz, with Dell'Oro Group. He said his firm has not yet adjusted any of its equipment sales forecasts, but that it might do so in the future due to the supply chain issue.
Another midband headwind
That's undoubtedly sour news to the likes of AT&T and Verizon. They're working feverishly to catch up to T-Mobile in the construction of midband 5G in the US. Mobile networks running on midband spectrum are widely regarded as ideal for 5G considering transmissions in such spectrum bands are both speedy and widespread.
T-Mobile hopes to cover up to 200 million Americans with its midband 5G network by the end of this year. Meanwhile, AT&T and Verizon recently delayed their own midband 5G network buildouts by one month in order to address concerns that transmissions in their midband spectrum might interfere with airline operations. But Verizon still hopes to cover up to 100 million people with its midband 5G network by March of 2022. And AT&T hopes to cover up to 75 million people with its own midband 5G network by the end of 2022. And both operators hope to dramatically expand those coverage areas throughout 2023.
But equipment shortages could affect those buildout targets.
Further, AT&T, Verizon and T-Mobile are all participating in the FCC's ongoing auction of spectrum in the 3.45-3.55GHz band, an event that promises to release even more midband spectrum for 5G. 5G equipment vendors including Ericsson and Nokia have confirmed that operators will need to deploy even more equipment to make use of the 3.45-3.55GHz band. But shipments of that equipment could also be delayed by component shortages and supply chain issues.
"The momentum [around midband 5G] is showing some weakness," acknowledged Pongratz. But he said it's too early to quantify how the situation might play out.
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