After a strong 2023, RAN set for decline in Indian market

Inventory correction, Covid-19 hoarding, slower 5G demand and macro-economic concerns combined with higher interest rates are often used to characterize the 2023 radio access network (RAN) market correction in the U.S. As we find ourselves amidst these challenges, the market is on course for the fifth steepest annual contraction since tracking began in the year 2000. Despite correct directional predictions for 2023, we clearly underestimated the dramatic RAN/capex drop in the U.S. market. As we are still in the middle of the storm and market conditions are expected to remain challenging, the question now is how this extended RAN downturn will impact the broader RAN market and the various subsegments in 2024.

Total RAN market to decline in 2024
Looking back, the global market is underperforming compared to our initial outlook. Preliminary findings from 1Q23-3Q23 data reveal that the North America RAN market is declining at a much steeper rate than anticipated. Interestingly, the capex decline in the U.S. aligns with operators’ communications, but the North America wireless RAN/capex ratio is on track to reach the sub-15% range, highlighting the disconnect lies not in capex decline but in the proportion allocated to the RAN.

Meanwhile, RAN excluding North America is actually coming in stronger than what we outlined going into 2023, in part because of the incredible 5G ascent in India. Putting things together, it appears that the surprise on the downside in the U.S. is more than enough to offset the stronger-than expected showing in the Asia Pacific region.

Looking ahead, we are forecasting global RAN to record a second consecutive year of RAN contractions in 2024, though the pace of the decline should be more moderate. The regional dynamics will change as the pendulum swings towards the negative in India. Wireless capex in the US is still on track to decline. Yet we are forecasting the North America RAN market to grow, implying a greater portion of the capex will be allocated towards the RAN segment in 2024.

Open RAN and vRAN to grow in 2024
The developments in 2023 were largely in line with expectations. Following a strong showing in 2022, both Open RAN and Virtualized RAN (vRAN) revenue growth were expected to slow in 2023 as the early adopter comparisons became more challenging. Preliminary findings show that the slow-down thesis was correct, however, the velocity of this deceleration impacted both Open RAN and vRAN more than expected. More importantly, the underlying message that we have communicated now for some time with the Open RAN movement carrying forward despite all the various speed bumps and the leading RAN suppliers playing a greater role was further validated in 2023, as both Nokia and Ericsson raised their public commitment levels.

In 2024, market conditions will remain challenging, reflecting the scale divergences between the early adopters characterizing the first wave and the early majority-type brownfield operator shaping the next phase. Still, we are modeling the overall Open RAN and vRAN revenues to improve as the comps with the early adopters stabilize and the commercial volumes with some of the smaller scale vRAN deployments gradually improve. Overall, Open RAN is projected to account for 7% to 10% of the broader 2024 RAN market.

Private wireless will grow yet remain small
With growth in public RAN investments slowing, all eyes are now on new growth segments such as fixed wireless access (FWA) and private wireless. In contrast to FWA, which is a smaller but more mature segment, private wireless is a massive market opportunity, potentially worth tens of billions in annual RAN revenues. But it is also not as mature as the FWA segment. Preliminary findings suggest private wireless accounted for about 1% to 2% of total RAN (public plus private) in 2022.

And even though the market is a lot smaller than many realize, the good news is that PoC activity and commercial revenues are advancing at a moderate pace (up around 60% YoY in 2Q23) and on track to grow at a double-digit rate in 2023.

In 2024, we are forecasting private wireless RAN revenues to advance more than 20%, underpinned by positive developments in multiple regions, especially China, Europe, U.S. and parts of the Asia Pacific. The pivot away from positioning private LTE/5G as a Wi-Fi + complement in the carpeted enterprise towards selling private cellular in industrial settings with poor Wi-Fi and macro cellular connectivity is already boosting the market. These trends will extend into 2024 as well.

At the same time, the underlying challenges when it comes to awareness, demonstrating the business case, the readiness of the device ecosystem, locating the spectrum, scaling the use cases, simplifying the solutions, integrating with existing systems, and converting engagements/PoCs to commercial deployments will not suddenly disappear just because it is a new year. Some verticals, such as manufacturing, energy, transport, and defense are further along. Still, the broader private wireless market will be nowhere near crossing the chasm in 2024.

Small cells – more of the same in 2024
Small cells have come a long way over the past 10 years. After initially failing to live up to the hype cycle in the early 4G era, these low-power systems now comprise around 10% of the broader RAN market.

Near-term growth is slowing but we remain optimistic about the long-term growth potential with indoor/outdoor mobile broadband (MBB), private wireless, FWA, and neutral host. The concept of neutral host is not new, however, one of the key differences this time is the target market and the potential TAM expansion. It’s no longer just about larger public venues. The improved economics, simplicity, scalability and deployment times associated with recently announced neutral host offerings are expected to open up opportunities beyond the traditional distributed antenna system (DAS) footprint.

In 2024, MBB is expected to drive the lion’s share of the revenues while private wireless and neutral host record the highest growth rates. And as a reminder, FWA utilizes both the existing MBB macro network and dedicated small cells. For now, the existing macro grid is addressing the bulk of the FWA traffic.

More supplier pivots in 2024
RAN remains a concentrated market, with the top 8 RAN suppliers accounting for more than 98% of the 1Q23-3Q23 RAN market. New technologies, architectures, and segments can in some cases present opportunities for vendors with smaller footprints. Still, the track record for new entrants is far from perfect.

Parallel wireless realized back in 2022 that its share of the MBB RAN market would not support its current cost base. As a result, the vendor scaled back and revised its broader strategy, focusing more on areas where it can be unique.

As more suppliers increasingly accept and realize that the traditional macro MBB market is extremely challenging to enter using the feature parity and pricing approach (with or without Open RAN), we are expecting more pivots in 2024 towards other RAN segments where the likelihood of standing out and succeeding is greater, such as FWA, private wireless, neutral host, and MBB in rural and low-level ARPU economies.

In summary, 2024 is unlikely to emerge as the most exhilarating year from a broader RAN revenue growth perspective. Even so, within the market, there will be pockets undergoing significant changes. While some of the upcoming growth areas will remain relatively small, 2024 is poised to be an important transition year for various wireless sub-segments. As always, the competitive RAN landscape will continue to be fierce. Despite the anticipated decline in certain aspects of the RAN market, it should be an eventful year. Dell’Oro