Huawei has set out a three-step process which it claims operators must go through, to become fully cloud-enabled. Of course, this triple jump is supported at each stage by elements of the Chinese firm’s All Cloud framework, which it unveiled at its analyst summit last week, pitching itself at operators embarking on digital transformation and the new network architectures required to enable that.
Huawei’s three stages are:
- Virtualization, which includes NFV and more flexible network resource allocation to improve efficiency and performance.
- Cloudification, which includes adds full orchestration and automation of network functions to basic virtualization, allowing operators to provision and manage services in real time, which will enable many new business models, especially in the IoT.
- Cloud Native, which Huawei defines as the stage where “the entire software system comprises a series of software microsystems that provide microservices”.
Most operators, the vendor says, are in the first stage, if they have embarked on NFV at all, while a few have reached step two. But all three will be needed to deliver on the full promise of virtualization and cloud – rapid provisioning, operational and cost efficiency, and agile response to shifting demand.
Libin Dai, Huawei’s director of network transformation, said the firm was working with various groups and operators to develop real use cases and tools around its framework. For instance, it recently announced an alliance with the MEF (Metro Ethernet Forum), ON.Lab and China Unicom to work on a set of proofs of concept, based on SDN, NFV and lifecycle orchestration.
“Huawei looks forward to bringing open source and standards together as we develop key use cases in order to deliver next generation services,” said Dai.
For research on wireless infrastructure, please refer to our RAN modules.
In last week’s edition, we looked at how the major OEMs will need to tread a careful balance, at this year’s Mobile World Congress, between being ahead of the pack on the 5G roadmap, and injecting plenty of life into that nearer term source of revenues, LTE-Advanced – in particular, the last full 3GPP 4G releases, 13 and 14, known as LTE-Advanced Pro.
Huawei has been calling these ‘4.5G’ for some time, and for once this is not just a marketing slogan but a real summary of how the Chinese vendor – and much of the industry – sees LTE-A Pro. A stepping stone to 5G, yes, but one which will continue to evolve in parallel with the new generation, and with significant overlap. Operators will not tolerate a complete step upgrade again, and even if new air interface technologies are introduced alongside the current OFDM-based ones (especially for the IoT), they will look to virtualization and software-defined networking to enable them to evolve their platforms gradually, in line with real customer need, and to support multiple technologies at once.
All of which makes 4.5G quite a meaningful label, for once. Huawei, the last of the big OEMs to preview its major MWC announcements, said it believed more than 60 commercial 4.5G networks would be deployed this year, ushering in a “golden five-year period” for Releases 13 and 14. “4.5G is the natural evolution of 4G and necessary transition to the 5G,” said Ryan Ding, president of products and solutions. “It can effectively protect operators’ investments and enable them to provide faster services and better user experience on the basis of existing infrastructures.”
Huawei’s definition of 4.5G, which it unveiled over a year ago, includes gigabit download speeds – which are supported in Qualcomm’s latest modem, the X16 – and sub-10ms latency. In particular, the new releases will make LTE – initially designed almost exclusively for faster mobile broadband – more suited to the Internet of Things, with new specifications like Category-M and NB-IoT, and the ability to support up to 100,000 connections per cell (the latter another of Huawei’s 4.5G criteria).
Huawei said it had already demonstrated or tested 4.5G technology with more than 20 operators in nine countries (Canada, China, Germany, Hong Kong, Kuwait, Norway, Singapore, Turkey and the UAE.). It added that operators in China, Hong Kong and Singapore had all achieved gigabit transmissions using pre-standard Huawei 4.5G kit. In addition, it added that Korea and the UK had started building LTE integrated trunked radio networks, and MNOs in Korea and China had launched commercial trials of NB-IoT.
By 2020, Huawei predicts the average mobile customer will be using about 5GB of data per month and there will be around 3bn “connected things” on cellular networks. “The answer to this vision now is 4.5G,” it says.
It also said it was engaged in 5G trials with some operators, but refused to follow Ericsson in putting a number on it this (the Swedish firm claims “nearly 20”). “We will have to wait for five years or even longer for 5G,” said William Xu, Huawei’s chief marketing strategy officer. “That is why Huawei has proposed 4.5G.”
Among the actual products to support 4.5G, Huawei unveiled a new family called GigaRadio. The first members are a blade remote radio unit (RRU) and an active antenna unit. The former is 20% smaller and 50% faster than other products targeting the same space, Huawei claimed, and can support gigabit speeds.
The OEM was not only reiterating its 4.5G mantra at its pre-announcements, even though its label is coming into line with the wider LTE platform with the appearance of LTE-A Pro on the horizon. It also set out a five-point plan to address the future needs of telecoms operators undergoing the transformation to digital. The five are Big Video or video everywhere; Big IT; Big Operations, mainly focused on agility; Big Architecture, or elastic networks; and Big Pipe for ubiquitous connectivity.
The big message was clear – for digital transformation, telcos need to rethink their platforms from end to end, and only very few vendors can address every link in the chain (Huawei, Nokia and Ericsson/Cisco). And as many observers pointed out, there was a clear overlap between Huawei’s five initiatives and the key areas Ericsson identified as growth drivers in 2014. The Swedish firm saw those growth areas – video and media, cloud platforms, IP, OSS/BSS and ‘industry and society’ – growing their revenues by 20% to total $5.3bn in 2015.
To achieve similar results from its new five-point plan, Huawei said it would invest $1bn over five years in a “developer enablement program” to expand the ecosystem around its framework, and says it already has 600 partners in its 10 open labs in China, Europe and other regions.
Meanwhile, other vendors were far less coy about overusing the ‘5G’ term than Huawei. The head of Samsung’s Network business unit, Youngky Kim, previewed the Korean firm’s own MWC infrastructure plans, including what it said were key enablers of 5G such as “multilink connectivity technology, centralized radio, IoT and mmWave radio access solutions”. Kim said: “5G technology will offer us a new level of experience, which is immersive, tactile and ubiquitous. Thanks to seamless mobility, higher throughput and low latency of 5G technology, new services like hologram calls, virtual reality broadcasting of live football games and self-driving cars will enrich our lives.”
In Barcelona, Samsung promises to “make 5G technology a reality” with a demonstration of millimeter wave radios, transmitting eight UHD 4K videos at once with latency below 1ms.
On the LTE-A Pro side, it will also launch solutions to support LTE in 5 GHz spectrum (LTE-U and LTE-LAA), plus MP-TCP (multipath transfer control protocol), Distributed-RAN Inter-site Carrier Aggregation and Samsung Smart Multi-Link. It names MP-TCP as one of its “key priorities”. The technology allows aggregation of two or more separate networks running different RATs, such as WiFi, 3G, 4G, 5G and LPWA. It does not just connect to them simultaneously, as in dual or multi-connectivity, but merges the data streams from each network at the IP layer, to make aggregation simpler and faster. The technology has already been commercialized in Korea.
Meanwhile, Smart Multi-Link is based on Samsung’s Unified Core architecture. This is designed to support backward and forward compatibility by supporting cellular networks from 2G to 5G, plus non-3GPP technologies, using NFV and SDN approaches to enable multiple distributed RANs to behave as a single pool of capacity around a single core.
Also on the virtualization front, it has upgraded its Cloud-RAN platform to version 2.0+, integrating new SON (self-optimizing network) and scheduler elements. Among the improvements are the ability for base stations to detect interference at the cell edge and control radio transmission power in real time, to boost data throughput by an average of 40-50%.
For the IoT, Samsung will show off a range of offerings including an IoT-optimized core, a specialized standalone base station for IoT, gateways, and support for the LPWA technology LoRa. It will also be offering a package of equipment, sensors and services for public safety IoT applications, claiming to be preparing “beyond standards” implementations to address mission critical use cases, as well as supporting Cat-0, Cat-1, Cat-M and NB-IoT.
The operators will be vying for 5G glory as enthusiastically as the vendors. Vodafone, AT&T, NTT Docomo, Telefonica and SK Telecom are among those which will demonstrate pre-5G technologies or announce major trials. Vodafone, has announced an extended set of partnerships – with Huawei, Nokia, Ericsson, Intel and Qualcomm – to research 5G technologies and prepare its networks for the transition, whatever that may involve in the real world.
Pre-standard operator trials are important because they help to define real requirements and shape the platforms in the direction of concrete business cases rather than technical wizardry. Vodafone aims to work with its partners to “define industry standards, establish technical guidelines and prepare product roadmaps”. It will evaluate the emerging 5G technologies to decide which it believes should be part of the standards; test hardware and software in its group Innovation Labs in the UK; conduct trials in global markets; and prioritize the benefits of 5G that can be brought to market by 2020.
CTO Johan Wibergh said: “The telecoms industry is still establishing what technology will deliver the benefits we expect from 5G, so it is important to establish dedicated research programmes with these leading global companies.”
Vodafone also chairs the NGMN (Next Generation Mobile Networks) 5G Requirements and Architecture group.
Over the pond, AT&T is working with Ericsson and Intel to launch a trial 5G network in Austin, Texas, in order to test emerging concepts like millimeter wave radios and virtualized RAN. Lab tests will take place in the second quarter of this year, and outdoor trials in the second half. By the end of this year, AT&T says it will provide real world connectivity to certain locations in Austin, using its selected ‘5G’ technologies, though these will initially be for fixed access only.
John Donovan, chief strategy officer and group president of technology and operations, said: “New experiences like virtual reality, self-driving cars, robotics, smart cities and more are about to test networks like never before. These technologies will be immersive, pervasive and responsive to customers. 5G will help make them a reality. 5G will reach its full potential because we will build it on a software-centric architecture that can adapt quickly to new demands and give customers more control of their network services. Our approach is simple – deliver a unified experience built with 5G, SDN, big data, security and open source software.”
Ericsson will also be showing off its 5G partnerships with Korea Telecom and NTT Docomo at MWC, demonstrating radio prototypes which support Multiuser MIMO, and beam tracking in millimeter wave bands, to boost throughput beyond 25Gbps.
Seizo Onoe, Docomo’s CTO, said in a statement: “Both companies are already conducting joint outdoor trials to understand how 5G will really perform in the field. This will enable us to plan for the new and enhanced services that we will be able to offer with 5G. We will be in a good position to highlight our commercial 5G capabilities in 2020.”
Half-year sales up 30%, with enterprise and smartphones the main drivers, though Chinese 4G projects also strong contributors
Huawei had three important boasts to make as it announced its results for the first half of fiscal 2015 - it turned in its highest year-on-year sales growth for five years; it is reportedly well on track to hits its target of 100m smartphone shipments this year; and it achieved an operating margin of 20%, more than twice that of its close rivals.
For the first half, Huawei reported revenues up 30% year-on-year to CNY175.9bn ($28.3bn) and said it would achieve "effective growth" in 2015. This is its highest rate of growth since it started reporting interim results in 2011. Its highest annual growth rate in recent years was in 2008, when its full year revenues were up by 33%.
Carrier infrastructure accounts for two-thirds of Huawei's revenues, making Ericsson, Nokia and Alcatel-Lucent its chief competitors - and like its Swedish arch-rival, it will be waiting to see whether the merger of the other two players will create a more difficult competitive environment, or whether it can benefit from a period of disruption and adjustment.
However, the Chinese company has a different pattern of revenues to those rivals, and a more complex competitive landscape. One, it has a stronger focus on the enterprise, which appeared to be the star of the first two quarters. Huawei does not break out the different operations until its full year report, but its CFO Meng Wanzhou said the enterprise segment had "started to experience accelerated growth", while she was more cautious about the carrier business, just saying it had enjoyed "steady growth". She highlighted cloud computing, storage, agile networks and smart cities as strong performers. In its enterprise segment, of course, Huawei competes aggressively with Cisco.
Two, it still has a major devices business, something all its wireless network peers, most recently Nokia, have now abandoned (though the Finnish firm may return to the fray indirectly through its licensing business). This embroils Huawei in the cut-throat price war for the saturating smartphone space, taking on Samsung and Apple, and a group of its compatriots, such as Lenovo, Xiaomi and ZTE.
According to an internal memo seen by Reuters, Huawei is ahead of schedule in reaching its target of 100m shipments this year. In recent years, the company fallen short of its stated goals for handsets - for instance, for 2014 it set a target of 80m units, but shipped 75m. However, its ability to predict its market and control its supply chain has improved, and so its forecasting has become steadily more accurate - while it was 5m units off in 2014, that was far better than a shortfall of 28m in 2012, when Huawei had predicted up to 60m smartphones but actually shipped 32m.
This year, it looks like getting it right, according to Richard Yu, head of the consumer business unit, who wrote in the memo that Huawei had shipped more than 10m units every month since May. According to Gartner estimates, Huawei was fourth largest smartphone vendor in the first quarter with 18.1m shipments and 5.4% share (Samsung, Apple and Lenovo were ahead of it). That figure would not set Huawei up for its 100m target, but Yu's memo suggests shipments have picked up dramatically in the second quarter, and that Huawei can boost its growth further in the second half. Meng said in her results statement that the midrange Mate7 and high end P8 models had performed particularly well, as well as the Honor family.
The third difference from Huawei's key rivals is, of course, regional. It is virtually excluded from selling critical infrastructure in the US, and some other major economies, such as India, have also raised the bar for purchasing from Chinese firms, officially on grounds of national security. So while north America is Ericsson's largest market, and Nokia CEO Rajeev Suri said this week that a stronger US presence would be one of the biggest benefits of buying ALU, Huawei hardly plays there (except in handsets, where it is launching a big offensive this year and is aiming for a top three market ranking in a couple of years' time).
The lack of US presence is offset by strength in its homeland, where major 4G roll-outs are underway. Meng said of the carrier business unit: "Investment continued to pour into 4G network construction in China. In addition, the growth in global data traffic drives investment in network capacity expansion, while carriers' digital transformation pushes up investment in the ICT industry. These factors helped us maintain steady growth in the carrier business."
Since western vendors are able to compete more effectively in China than Huawei can in the US, it needs additional markets and has invested heavily in European customers and R&D, as well as pulling ahead of its competitors in some emerging economies, particularly in Africa and south east Asia.
Huawei also reported an operating margin of 18%, down slightly from 18.3% in the year-ago period but up on the full year 2014 figure of 11.9%. The second half of last year was hit by high marketing and R&D costs, analysts said, but it remains to be seen whether a similar pattern affects 2015. Margins are very healthy for this market - by contrast, Ericsson's operating margin for Q215 was 5.9%, while Nokia's for Q115 was 8.3% and ALU's was 2.5%.
"We are confident that we will maintain effective growth and steady and healthy development in all business segments in 2015," Meng summed up, though she did not offer specific guidance. It is likely that the smaller units will be the main drivers of that expansion. The enterprise and consumer businesses experienced faster growth than the carrier unit in 2014, increasing sales by 27.3% and 32.6% respectively.
BY CAROLINE GABRIEL
Huawei has overtaken Panasonic as the largest applicant for international patents, according to a survey of 2014 submissions conducted by the World Intellectual Property Organization (WIPO).
The patents surveyed all relate to IT and telecoms technology, and the latest report from the United Nations body mirrors the shift in technological R&D and patent power from traditional strongholds, like Japan and the US, to China. The largest category of patents relates to computer technology, while digital communications accounts for almost 15% of the total.
The league table is an important benchmark of technological power, and it shows some traditional big-hitters, like Qualcomm, still holding considerable sway. The US chip giant, whose business model is heavily reliant on IP licensing, was the second biggest applicant for international patents in 2014, with 2,409 published applications, to Huawei's 3,442.
Among the top 50 applicants, Huawei also had the largest increase in filings (up by 1,332), followed by compatriot Tencent, and then Microsoft.
In third place was another Chinese major, ZTE, with 2,179 applications under the Patent Cooperation Treaty (PCT), the basis of WIPO's rankings. A single PCT filing allows applicants to seek patent protection in 148 countries at once.
Communications dominate the filings. Digital communications, including mobile technology, accounted for two-thirds of Huawei's applications, followed by computer technology and telecoms; while for Qualcomm the percentages were 40% and 10% respectively, and for ZTE they were 61% and 13%.
The overall trends reflected in the report are well known - the change in the basis of China's technology power, from low cost manufacturing to heavyweight innovation and a bold attempt to create a homegrown hi-tech economy and to lead international standards. China was the only country to see double-digit growth in filings compared to 2013, while Japan saw its total fall.
The US, predictably, remains the biggest source of filings with its companies totalling 61,492 applications, up 7.1% on the previous year. Japan was in second place with
42,459, down 3%, while China was in third place with 25,539, up 18.7% year-on-year. China and the US accounted for 87% of the total growth in filings, which overall was up by 4.5%.
There were, however, signs of a fightback by European companies, which have led the development of some technology markets in the past, including the 2G and 3G mobile generations. Recession and consolidation have weakened the influence of Europe, but the Commission is determined to put the region in the forefront of '5G' standards and patents, and for the first time since 2007, the top three EU nations saw an increase in their PCT filings. The strongest growth came from the UK and France, said WIPO.
Huawei and Lenovo snap at the heels of the big two, as Apple and Samsung see their lead eroded
According to IDC figures, Samsung and Apple lost some share, while Huawei and Lenovo were elevated to third and fourth positions, respectively, in the Q2 league tables by unit sales. LG was in fifth place. Its share was virtually stable year-on-year, but slid by a significant 0.1 percentage points - taking it below the 5% mark which is often seen as psychologically critical for mass market success.
Only four suppliers are above that level now, as the market consolidates around a few big brands, among which the Chinese majors are increasingly important. Below the water line, there is an increasingly fragmented picture, however, with a host of emerging market vendors taking advantage of the overall market shift towards emerging economies, featurephone transition and low end smartphones.
In the quarter, Samsung still held 25.2% of total sales, but this was down 7.1% year-on-year, while Apple slipped from 13% to 11.9%. Huawei was up from 4.3% to 6.9% and Lenovo from 4.7% to 5.4%, in a segment which grew by 23.1%, to reach a record shipments level of 295.3m units.
"As the death of the featurephone approaches more rapidly than before, it is the Chinese vendors that are ready to usher emerging market consumers into smartphones," commented IDC analyst Melissa Chau in a statement. "The offer of smartphones at a much better value than the top global players but with a stronger build quality and larger scale than local competitors gives these vendors a precarious competitive advantage."
This causes problems not only for the big two - at their lowest market share levels for years - but for former giants such as Sony, now relegated to the 'others' category. Some are resorting to selling themselves - Motorola will soon be part of Lenovo, Nokia has gone to Microsoft - but Sony's CEO Kazuo Hirai has put mobile devices, along with content, at the heart of his plan to restore profitability.
In fact, some of his plans are coming to fruition, as Sony reported a surprise profit in its fiscal first quarter. But this was driven by strong demand for the PlayStation 4 console and improved performance at its movie business, not by smartphones. The company posted net income of ¥26.8bn ($261m), where analysts had been expecting a loss of about ¥11bn. Operating profit almost doubled year-on-year to ¥69.8bn.
However, Sony reduced its sales forecasts for smartphones, as well as TVs, while announcing a joint venture in displays with three Japanese partners - Panasonic, Japan Display and Innovation Network. The mobile products unit recorded a loss of ¥2.7bn, compared with a profit of ¥12.6bn a year earlier. Sony expects to sell 43m smartphones this year, down from its previous forecast of 50m.
As one report says the Chinese firm has overtaken the leader in carrier networks, Ericsson benefits from shift to capacity
Huawei reported preliminary figures for the first half of 2014, which showed a 19% year-on-year revenue leap to CNY135.8bn (€16bn), with an operating margin of 18.3%. It has not yet published additional details, but credited a range of factors with its uptick - growing investment in LTE worldwide, also cited by Ericsson; rising carrier spend on software and services; "sustainable growth" in handsets; and a buoyant enterprise business.
"Driven by increasing investments in LTE networks worldwide, Huawei has further solidified its leadership position in mobile broadband," said CFO Cathy Meng, in a statement. "Rapid growth in software and services helped maintain steady growth in our carrier network business ... We are confident that in 2014 we will achieve sustainable growth, robust operations, and healthy financials."
Meanwhile, Ericsson turned in solid Q2 results, though its revenues were down 1% on the same period last year, to SEK54.8bn ($8bn). Its performance cannot be compared directly with that of its arch-rival until Huawei publishes full quarterly breakdowns later this month, but it will be very aware of the shift in major spending from north America, where Huawei is all but excluded, to China, as well as its competitor's broader reach, with its handset and enterprise businesses both on the rise.
But the improvement in margins is an important achievement for Ericsson, building on the start of that pattern in Q114. Last year, the Swedish firm's profits were depressed by the carriers' emphasis on lower margin modernization and coverage projects, but now, many are starting to invest in capacity, especially in LTE.
Gross margin was up by four percentage points to 36.4% while operating margin rose by 2.8 percentage points to 7.3%. That helped drive up net income by 76% year-on-year to SEK2.7bn.
In the quarter, 53% of revenues came from the Networks division, 42% from Global Services, and 5% from Support Solutions (which includes the growing TV Media activity).
As well as mobile broadband capacity roll-outs, including in north America, CEO Hans Vestberg also singled out the IP router business - which has 120 customers now - and managed services, as highlights. In the latter category, Ericsson won 21 new deals in Q2, including projects in Greater China, and "one of the largest transformation deals we have ever done", with T-Mobile USA, whose BSS Ericsson will upgrade and manage. OSS/BSS, including virtualization, will be important growth drivers, said Vestberg.
The CEO also said Ericsson's handset modem business "will start generating sales by the end of this year", as the company's M7450 modem begins to feature in "smartphones and data devices".
On the negative side, Ericsson said the Middle East and Africa businesses were hit by political unrest while there were "lower revenues from two large mobile broadband coverage projects in North America, that peaked in the first half of 2013, and reduced activity in Japan".
According to new calculations from analysts at Infonetics, Huawei overtook Ericsson as the leading telecoms equipment supplier to service providers in 2013. With Chinese roll-outs gaining volume as several major US deployments slow down, the benefits of the company's position in its homeland are more than offsetting the effective bar on Huawei kit in the US, where Ericsson has been part of the leading LTE roll-outs.
In the overall telecoms and datacomms equipment space, which rose by 3% year-on-year to $183bn, Cisco leads because of its enterprise power, followed by Huawei, Ericsson, Alcatel-Lucent and ZTE. In the enterprise, Cisco's challengers (though all well behind the leader) are Avaya, Brocade, HP and Juniper, sharing similar market shares. The analysts project that a cumulative $1.01 trillion will be spent by service providers and enterprises on telecoms and datacomms equipment, and software, between 2014 and 2018.