We participated in the Huawei Analyst Summit 2022 (#HAS22) for three days this week.  The conference started with a keynote featuring Rotating Chairman, Ken Hu and then there were many executives and managers in charge of various operating groups at Huawei.   To summarize, Hu said there will be challenges ahead and emphasized software, services and partnerships instead of asserting leadership in hardware as it did last year.  Additionally, other speakers discussed the progress Huawei is making in F5G, introduced its latest Massive MIMO 64T64R radio system, discussed its progress with both indoor cellular and Fixed Wireless Access markets.

At the keynote, Ken Hu, and his other colleagues on stage made no mention of hardware systems, semiconductor, nor optical component plans, in sharp contrast to the year-ago HAS keynote made by last year's Rotating Chairman, Eric Xu.  Instead Ken and his colleagues focused on the importance of software development (re-engineering software compliers to boost performance, for instance), the opportunity to work with the Huawei cloud service, entry to new markets (automobiles, the metaverse), and of course, the company's green initiatives.  Mr. Hu also addressed supply chain challenges, saying that "it is true that we face a chip shortage," and that "we have no plans to build chip factories ourselves."  Hu also said that the shortage will be "fixed in a few years."  Hu also said that the company is organizing itself to allow for the shutdown of divisions or product areas more easily than could have been done in the past, which we think could mean it is planning for what might happen if Huawei cannot obtain chips, for instance, for its smartphone business.  The last of Hu's prepared remarks was to remark that "Huawei has quite a few challenges ahead."

In the Telecom Core meetings that were held, there were several interesting points raised by the presenters.  The team says that container based systems are not as mature as that of systems based on Open Stack and that Containers are not standards based.  Regarding Mobile Edge Computing (MEC) market, Huawei said that its experience is that "almost all" of its customers are using MEC for network connectivity and though it had offered a marketplace for third party applications, they haven't been adopted much as of yet.  Huawei sees Slicing as an emerging opportunity that will allow its operator customers to monetize their networks and to offer differentiated experiences.  

Huawei spent a lot of time conveying that participation in the F5G (Fixed 5G) market is shared with other participants.  Among those who shared the stage with Huawei were standards body ETSI, China Telecom, China Mobile, China Unicom, Globe Telecom (Phillipines), MTN Group (South Africa).  Besides its product managers discussing F5G, Ken Hu also highlighted its importance during his aforementioned keynote.

Huawei's Radio Access Network (RAN) team highlighted a new 64T64R Massive MIMO system that has 384 antennae elements.  Through multiple presentations, various managers highlighted how the new M-MIMO system enhances throughput and range, reduces power and other advantages of using its new product.  The company also highlighted its Digital Indoor System (DIS) as a means of enabling enterprises across various vertical markets including manufacturing, coal mines, the steel industry, the petrochemical industry, shipping ports, healthcare, power-grid companies and others.  Huawei said that in 2H22, it will bring to market a low-power chip-based system, as well.  The company also highlighted a customer, Schneider Electric, who expects to enter its deployment phase of Huawei DIS systems later in 2022.   

We found that Huawei's participating in the Fixed Wireless Access (FWA) market is interesting.  Similar to Ericsson, Huawei isn't participating meaningfully in the Customer Premises Equipment (CPE) part of the FWA market and instead is selling just the RAN equipment.  It has a certification program where it endorses other manufacturers, including greenpacket, who made a presentation at the Huawei conference.  greenpacket explained that it is seeing a lot of demand lately for "hybrid" FWA CPE systems, which we took to mean that these were battery-based devices that users can travel around with.  It is the experience of the presenters (both Huawei and greenpacket) that their customers in places like Kuwait and South Africa consume about 2-3 times more data using FWA than do average mobile (eMBB) customers.  The presenters contrasted this with the T-Mobile experience in the US market where 10% of its FWA customers consume 1 TB per month.  We found this contrast very interesting and feel that the screen sizes of customers in the US market (probably lots of high-end TVs) dramatically exceed that of the South African market (predominantly smart phones).  In our own FWA report, we have seen significant ramp-ups in volume in the 3GPP FWA market.

​Our big takeaway from its recent global analyst meeting was that Nokia is formalizing its enterprise business.  Of course, the company’s primary business, which focuses on telecom service providers, is undergoing major product updates, including towards 5G, Fixed Wireless Access and towards network slicing.  We have published about these topics in other posts relating to Nokia in the past several months, having attended other Nokia events, so we focus on topics we haven’t discussed recently.

The company acknowledges that telco capex is expected to be unexciting and is redoubling efforts to gather enterprise customers.  In 3Q18, Enterprise represented 5% of revenues.  The company expects 8% CAGR for Enterprise Networking.  Of course, the company covered many topics beyond enterprise, including its view on megatrends, the importance of spectrum instead of differentiation between 4G and 5G, residential WiFi and Fixed Wireless Access, its recent wins at major telcos, the impact of the recent re-organization, the impact of the trade war and other topics. 

Enterprise market, Private cellular and WiFi.  The company’s view is that private LTE will challenge WiFi for certain applications in its “strategic” enterprise markets, including for verticals such as logistics and transportation.  Considering the Nokia view, we expect private LTE and WiFi will co-exist in the future.  We think that Nokia can succeed with its private LTE strategy, because this is mostly a “greenfield” opportunity.  Many of the cases Nokia explains it is seeing success are outdoor, not indoor, where WiFi is so popular.  A number of industries are likely to adopt private LTE (mining, logistics are good examples), and later 5G, but we expect most every industry will maintain their reliance on WiFi.  We keep in mind that in light of the fact that 802.11ax (which began shipping 3Q18) incorporates many more cellular-like capabilities, WiFi will have a seat at the table for some time to come even in these critical industries.  Interestingly, by leveraging service provider channels, the company has plans to enter the “branch” enterprise network market, using SD-WAN as its “Trojan horse” to enter.

Megatrends.  From a strategy standpoint, Nokia sees megatrends: Ubiquitous connectivity, multi-cloud, deep analytics, industrial IoT and regulatory.
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Spectrum takes on new importance.  On mobile radio, the company focuses on spectrum differences as much as the difference between 4G and 5G.  The company’s view is all macro basestations should have mmWave.  Describing its 5G ramp, Nokia’s factory capacity related to 5G infrastructure has quadrupled this most recent quarter; and the company “went to volume shipments” on its new, in-house Reefshark chips in 3Q18. 

Residential WiFi and Fixed Wireless Access.  The company’s new mesh WiFi will be made available at its first service provider customer’s stores in the month of November.  This mesh technology is from the recent acquisition of Unium. The company’s first Fixed Wireless Access (FWA) customers have begun deployments, for both 4G cellular and WiGig (60 Ghz 802.11ad).  We understand that the 4G cellular projects are largely at mobile service providers working to leverage existing investments in their mobile infrastructure, while WiGig is in demand at enterprises and traditionally fixed-line service providers. The company expects 5G FWA infrastructure will be ready to ship in 2019.

Recent wins at service providers.  New wins announced €2B around this event include “frame wins” at major Chinese service providers

• China Mobile: radio access, core, passive optical networks, IP routing and optical transport, SDN, network management and professional services.
• China Telecom to improve country-wide 4G LTE coverage and hot spot capacity. Nokia will provide its end-to-end portfolio and solutions for China Telecom including FDD-LTE radio access, home CPE solutions, core routers, multi-service edge routers and optics as well as its services expertise.
• China Unicom deploy technologies across the country including Nokia FDD-LTE radio access, Multi-access Edge Computing, virtualized IMS, SDN, IP routing and optical transport, and fixed network equipment.

The company also emphasized its multi-billion dollar deal recently signed with T-Mobile US.  Neville Ray, CTO of T-Mobile US presented at the event.  Additionally, AT&T’s Chris Penrose, SVP IoT, discussed its relationship with Nokia using the WING service; this is a global IoT service that uses revenue co-sharing between AT&T, Nokia and the many regional service providers in non-AT&T locations.  AT&T made the point that IoT is a business service.  Telia, headquartered in Nokia rival’s Ericsson’s home country, Sweden, made a compelling presentation at the meeting, as well.

The impact of the recent re-organization.  On the day of its recent earnings call, the company announced a planned re-organization, along with some reductions in force, to reduce spending so the company can hit its year 2020 financial targets.  The importance of this re-org, from our standpoint, is that the Software division of the company will be in charge of managing several products that used to be part of the Mobile division beginning Jan 1, 2019.  Products moving from Mobile to Software include IMS CSCF and TAS.  We have verified that Packet Core (including EPC/4G and 5G Core) will remain in the ION (IP and Optical Networks) division, where it has been for years.
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Trade war.  According to Rajeev Suri, CEO of Nokia, Australia, UK, Korea, Japan, possibly Canada all may ban Chinese telecom gear.  Suri expects that Nokia’s “working assumptions” are that: (a) around 20-25% Chinese market share is available for foreign vendors, and (b) potentially, ZTE will take more share in China, and that (c) foreigners (like Nokia) will still be able to play. Suri explained that Nokia hasn’t seen Chinese vendors get more aggressive in Middle East and Africa (MEA).

We attended the Nokia Fixed Broadband group analyst meeting in Tokyo last week and found that the company’s portfolio is expanding rapidly.  The company’s view is that capital spending at its customers will be flat in future, and therefore the company is taking the approach to grow its portfolio beyond its core DSL and Optical core to potentially allow it grow revenues.  It has expanded its product line to include cable (from Gainspeed acquisition), more recently home WiFi (augmented through acquisitions) and is rolling out Fixed Wireless Access (FWA).  The company is also predicting that the Indian subcontinent and fixed network wholesaling will become significant opportunities for the Nokia Fixed Network group.

• Cable.  Admits that it took a year longer for DAA to develop.  In deployment phase at WOW! And we get the sense that there are some significant wins that Nokia could announce in the future.  It claims to be the only vendor with DAA available today.
• Fixed Wireless Access (FWA).  The company is offering two versions of FWA: The company is offering two versions of FWA: (a) 3GPP radio access network based and (d) unlicensed WiGig (60 Ghz WiFi-based).  The company expects 5G-based solutions to hit the market in 2019.  The company’s first FWA customer is an enterprise, using WiGig.  But, the main focus is on large Service Providers.  The company is not focusing on Wireless ISPs (WISPs).    
• WiFi.  Nokia is making a push to enhance its Broadband CPE portfolio to include more advanced WiFi capabilities.  It is launching a “mesh” capability that will become popular across its broadband CPE product line.  Mesh is a very popular router category that has been propelling growth for vendors such as eero and Google.

Additionally, Nokia emphasized an enabling technology to allow fixed network wholesaling - slicing.  The company has begun discussing Altiplano, an SDAN (Software Defined Access Network) system.  This allows multiple service providers to share the same fiber and equipment installed base.  The company’s view is that just like mobile network tower sharing happened to reduce capital spending, the same will happen with Fixed Broadband networks – but this requires a virtualization technology such as SDAN.