Company bids to strengthen its place in network infrastructure
At the end of April 2021, Samsung reported a good quarter of revenue despite experiencing problems with component supplies. In fact, Samsung more than kept its head above water throughout the whole pandemic, with divisions including its Consumer Electronics and IT and Mobile Communications units increasing their revenues. But despite its strong performance, the company remains cautious about its outlook. Samsung understands that competition is fierce, especially in the markets for mobile devices and other consumer gadgets.
So, it should come as no surprise that Samsung continues to foster multiple sources of revenue. In a world preoccupied with 5G, the provision of network infrastructure presents itself as a possibility — albeit a challenging one — and Samsung is well placed to take a bigger slice of this market.
Capitalizing on the general move toward equipment based on open interfaces and network function virtualization, Samsung’s portfolio of 5G radio access network (RAN) equipment is fully open and fully virtualized, and can run on any commercial off-the-shelf server. This means that operators can mix and match its products with equipment from other suppliers. Samsung’s 5G RAN products are made up of a virtualized central unit, a virtualized distributed unit and a wide range of radio units.
Samsung was responsible for much of the infrastructure used to support the early launch of 5G services in South Korea and the US, and has benefited from being quick off the mark. These initial 5G deployments allowed Samsung to show off its expertise to operators in markets where 5G networks were in their planning stage. And it seems like Samsung’s early demonstration of its 5G capability was a success, because the company has signed several important 5G network infrastructure deals since then.
Starting with North America, Canadian operator Telus secured a 5G network deal with Samsung in June 2020. The value of the contract wasn’t revealed, but Telus also announced its commitment to a further $40 billion investment in 5G networks over the following three years, together with the launch of the first phase of its 5G network covering Vancouver, Montreal, Calgary, Edmonton and Greater Toronto.
But the big news took place south of the border a couple of months later, when Samsung secured a 5G network deal with US carrier Verizon. Valued at $6.6 billion, this is equivalent to more than 3% of Samsung’s total revenue in 2020. The deal is a major win for Korean giant and has raised its profile in network infrastructure. It came as a surprise to some industry-watchers who thought Nokia would win the contract.
Typically, operators tend to choose between Ericsson, Huawei or Nokia, as these end-to-end integrated network suppliers dominate the market for multibillion-dollar mobile infrastructure contracts. But Samsung’s position in the cutting-edge 5G market of South Korea has boosted its credibility and this, together with its evolved RAN profile and Huawei’s fall from grace, has opened up a greater opportunity for Samsung to elbow its way to the table alongside the “big three” RAN system suppliers.
Part of the improving perception of Samsung as a RAN equipment player comes from the fact that it isn’t working alone — Samsung has partnered with the likes of Qualcomm, Hewlett Packard Enterprise (HPE), Marvell Technology and Xilinx for its base station products. It also has a deal with HPE to work on 5G core software and edge computing offerings. Such partnerships can only help to build its mobile networking credentials.
As Samsung continues to cultivate its existing relationships, one of its main strengths has been its ability to establish itself in new areas. For instance, since January 2020, Samsung has announced additional agreements for supply of mobile network equipment with UScellular in the US, Videotron in Canada, KDDI in Japan and Spark in New Zealand.
In a smart move, the company announced it will open a network business in Australia in April 2021. The new office places Samsung in an excellent position to negotiate future deals with local operators, and the company can also benefit from Huawei’s diminishing presence after the Australian government banned the Chinese player from providing 5G infrastructure in the country.
The launch of Samsung’s new Australian office was also well timed for the country’s latest 5G spectrum auction, for 2.4 GHz of spectrum in the 26 GHz band in 27 regions nationwide. And if December 2018 seems like a distant memory, operators in these areas have a more recent demonstration of Samsung’s abilities in the form of Spark New Zealand’s 5G network, launched in March 2021.
Samsung’s infrastructure business has a long way to go before it can deliver the kind of revenue that its semiconductor or mobile devices produce, and it’s important to highlight that Samsung continues to face challenges. However, its networks business has gained significant traction over the past 12 to 18 months, and we expect the company to announce network deals in Asia–Pacific soon.
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