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2007: Linear growth in search of a tipping point

By Adlane Fellah, CEO and founder
Contact the author at afellah@maravedis-bwa.com

As Maravedis predicted in the 4th edition of its Worldwide Market Trends report, the fixed/portable broadband wireless access equipment market (sub-11 GHz) more than doubled in the last two years. It grew to US$1.2 billion in 2007, up significantly from US$562 million in 2005.

WiMAX is an important and highly visible part of the evolving fixed/portable wireless landscape. WiMAX is certainly gaining momentum, what with the recently announced BSNL deployment as well as the articulation of Sprint’s 4G vision. Nevertheless, the market for WiMAX fixed deployments market remains diverse and includes competing technologies such as DOCSIS, TD-CDMA, and proprietary equipment such as Canopy from Motorola.

Despite the doubling of the BWA market, the overall success of WiMAX still depends on reaching a critical mass in both under-served and developed markets.  Specifically, higher volume production of chips, antennas and other components needs to occur. This will drive down the price structure of the supply chain for WiMAX products and increase the market uptake. For instance, the price of ICs and other components used in CPEs and embedded products will move down rapidly as the volume of production (now largely fabless) shifts from the hundreds of thousands to the millions of units under long term contracts.

This will ultimately make CPEs more affordable, a key enabler for WiMAX to succeed in developing countries with low broadband penetration. Moreover, these emerging markets have less competition for the mature packaged services and full-featured portable devices found in developed markets, making these markets an ideal proving ground for WiMAX’s potential to scale up to mass production and close the digital divide.

Maravedis Market Data

To derive BWA market sizes, Maravedis collected CPE and base station (or sector) shipment figures from the top 24 equipment vendors. The latter provided us also with their regional, frequency, and application breakdowns as well as their average selling prices (ASP) for CPEs and base stations or sectors. In the rare case where equipment vendors did not share any shipment data with our team, we were able to use our unique WiMAXCounts™ service, which tracks WiMAX deployments by operator in more than 250 operators worldwide. WiMAXCounts™ also provided us with a benchmark to assess any discrepancies between supply (shipments) and demand (deployments).

The following table presents an estimate of shipments for both CPEs and base stations among all sub-11 GHz equipment providers in the industry.

Source: WiMAX, LTE and Broadband Wireless (Sub-11GHz) Worldwide Market Trends 2008-2014 - 5th Ed

For this analysis, the BWA PMP (point to multi point) market includes systems that operate below 11 GHz.  The analysis does not include 802.11 products.
 
The average annual growth rate in the past five years was about 50%. This is a respectable growth rate, considering that in 2007 the certified equipment market represented no more than 14% of the total shipments. Obviously, equipment vendors and service providers alike are anxiously waiting for that growth rate to reach the three digit numbers that will translate into massive adoption of the WiMAX technology and black ink on the financials. For these mass volumes to materialize, the industry needs the major service providers to spend billions in WIMAX networks and marketing plans, whether it is for a fixed/portable play like BSNL/VSNL in India or a mobile so-called 4G network.

Mobile-WiMAX equipment sales are expected to eventually displace outdoor fixed-WiMAX equipment sales.  While fixed-WiMAX growth will continue its $100M/year baseline over the next 3 to 5-years, gradually the deployment profile of both fixed and mobile applications will begin to involve only mobile WiMAX equipment.

The question is how the major mobile network vendors will respond to this market evolution that is largely driven by numerous smaller, more specialized vendors. Given the fact that the majors are resourced for longer term planning horizons while the specialized vendors remain cash-flow dependent, could the major vendors persuade operators to reserve CAPEX in anticipation of mobile-WiMAX and ultimately starve the specialty vendors into submission? 

Indeed, specialty vendors are searching for defensible niches for fixed sales, e.g. in emerging markets with teledensities below 15%, partially because deregulation can create ‘use it or lose it’ spectrum licensees’.  Of course, regulators can be shown that spectrum is ‘in use’ without forcing operators to spend commercial-grade CAPEX.  Some specialty vendors are planning mobile-WiMAX build-outs, led by developed markets in Asia and the Americas, where future mobile networks could overlay current fixed networks.

The tipping point, as referred to by Robert Syputa in his article, is a work in progress. In the meantime, we expect growth to continue along a linear trajectory.   

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