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Price increases, supply chain problems weigh on US equipment vendors

Two of the biggest US-based suppliers of wireless networking equipment reported that their quarterly results will be dramatically affected by issues including inflation, component shortages and supply chain troubles. And as a result, they're joining other equipment vendors in jacking up their prices.

Broadly, the developments indicate that the wireless networking space remains in a state of upheaval. And that the situation is likely to continue through 2022.

"While we have begun to pass some of these expenses on to customers through price increases, we expect the increased cost impact of components and freight to continue. We anticipate such supply chain challenges to extend through 2022," warned Airspan CFO David Brant during the company's quarterly earnings conference call this week, according to a Seeking Alpha transcript. The company sells equipment to a range of network operators, including Gogo in the US and Rakuten in Japan. Airspan also continues to boast of 5G products for US cable network operators.

Airspan CEO Eric Stonestrom said the company has raised its prices on new orders by an average of 7% to 10%. "However, we have negotiated new orders from two of our bigger customers with price increases, in one case, in excess of 15%. And in the other case, a substantial amount at that level," he said, without naming the customers.

According to company executives, a big reason for the situation is supply chain problems. Airspan's Brant suggested the company lost around $10 million in revenues in its most recent quarter due to supply chain problems.

Indeed, the issue is such that Airspan officials said the company has redesigned seven products during 2022 to remove components that were either impossible or difficult to obtain.

Airspan isn't alone.

"Cambium Networks now expects GAAP [generally accepted accounting principles] revenues of between $61-$63 million compared to the previous outlook of $77.5-$81.5 million," the company warned in a release this week. Cambium is a major supplier of Wi-Fi and fixed wireless access (FWA) equipment and has teased an interest in 5G.

(Source: Pavel Kapish/Alamy Stock Photo)
(Source: Pavel Kapish/Alamy Stock Photo)

Continued the company: "The change in outlook primarily reflects the consequence of two unexpected events during the first quarter 2022. A lockdown by the Chinese government in Shenzhen as a result of rising COVID cases impacted manufacturing during the middle of March. In addition, during the last two weeks of the quarter, a lockdown in Shanghai closed our distribution and warehousing facility. Without the supply and distribution constraints, Cambium Networks would have been within or above the high end of the previous first quarter 2022 revenue outlook range."

Financial investors were spooked. "Was this the canary?" wondered the analysts at Raymond James in a note to investors after Cambium's warning.

"This is likely to affect other companies with exposure to Chinese manufacturing and distribution," they wrote. "Although lock-downs lasted only a few weeks, they occurred during the critical end of March quarter."

Companies from NeoPhotonics to Ciena, Cisco, HPE, Juniper and Nokia could also be affected, the analysts warned.

"Our industry contacts suggest the Street is too optimistic regarding supply chain improvement. Suppliers continue to play 'Whac-A-Mole' with challenges, the situation remains largely unchanged with the most acute constraints occurring on low-cost, low-tech yet vital components. Most suppliers expect supply chain constraints to last into 2023, but begin to ease in 2H22."

Supply chain issues have been a theme among vendors throughout the pandemic – but new manufacturing shutdowns across Asia have surprised them.

Partly as a result, vendors including Nokia, Cisco, CommScope, Ciena and Cambium are among the companies signaling that they are hiking prices for their telecom equipment.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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