Maravedis recently released its 4GCounts Quarterly Report, which as usual yields a wealth of hard figures that the industry is in need of. Many of the questions answered by the report addresses are challenging to answer.

In the context of this report I want to deal with an issue I have been asked several times, and that also in the past when I worked for a WiMAX chipset vendors: “where the heck all these chipsets silicon vendor ship go to?” How can the stark difference between reported chipset and device shipments on the one hand, and subscriber additions on the other, be explained?

In June 2009, Maravedis reported that mobile WiMAX device shipments amounted to 1.57M units in 2008, while fixed WiMAX device shipments were about 700 thousand units. This was based upon a thorough interview process with all stakeholders.

At the same time, the latest 4GCounts Quaterly Report found that 1.66M subscriber additions were added between Q2 08 and Q2 09.

Implicitly, these two statements answer part of the question. One should allow for 3-6 months delay in the supply chain. Many of the so called “shipment figures” we collect from industry stakeholders refer to the orders placed by a customer rather than the number of units drained from stocks and shipped to customers. From order placement to actual subscriber addition there is a delay of anywhere between 3 and 6 months. Shipments reported in the beginning of 2008 have likely not been translated.

In a maturing market these delays are stretching even more. Customers tend to place larger orders rather than fractioning them in order to get a better deal on prices. If selling prices of chipsets are reaching the US$15 mark in some deals, this is chiefly because ODMs and OEMs are more willing to furnish their inventory rather than pay higher prices.

This applies also in the customer-supplier relationship between OEMs and operators. Some operators are notorious for not hesitating to make significant orders before subscribers.

Korea Telecom is a good example of an operator who sourced way more devices than it acquired customers. Device vendors concordantly reported that Korea Telecom has placed orders for over 200 thousand CPEs in 2008 alone, while its subscriber count barely reached the 200 000 subscriber mark. In 2007 Korea Telecom has already sourced well over 100 000 devices.

Most surprisingly KT’s subscriber headcount dropped from 201 000 in Q2 2008 to 160 000 in Q4 2009, but increased again to reach 218 000 in Q2 2009.

Well, in the case of Korea Telecom, high inventories and aren't obviously the only explanation for the discrepancies between subscriber figures and the number of CPEs sourced. Replacement of existing Wave 1 devices by Wave 2 devices is another part of the equation. Finally, one should question the idea that a subscriber buys one single modem.

When it comes to assessing inventory sizes through the supply chain, Q1 2009 gave us an excellent opportunity. In the first quarter of 2009 operators continued adding subscribers, while at the bottom of the supply chain chipset vendors almost stopped shipping. Recovery in the silicon market only occurred by mid Q2. It is fair to say that roughly 500 000 new subscribers’ demands were met by taking out inventories which represent one third of 2008 shipments.

Maravedis is the only market research firm tracking subscribers, infrastructure, device and silicon shipments by systemically interviewing all stakeholders at the different levels of the value chain. Assessment of inventories, devices renewal rates and device per subscribers ratios are issues we track and monitor closely in order to cross check the different figures we retrieve. We therefore deliver the most accurate figures and best in class market analysis.

For more information you can contact the author at bilel@maravedis-bwa.com

Copyright © 2009 by Maravedis Inc. All Rights Reserved.
No reproduction without consent.



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