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Big themes at the show were WiFi-6, 6 GHz, and 802.11ah. We share some comments about the following organizations: WiFi Alliance, Commscope, Newracomm, Celeno, Cambium, Juniper Networks, On Semiconductor, Extreme Networks, Webb Search, Facebook, UK's Ofcom, Huawei, and 650 Group. The WiFi Alliance and a handful of other speakers commented that WiFi-6 has lower latency than 5G, but the Alliance conceded that cellular had better mobility. We think the WiFi community is not doing enough to promote WiFi-6’s low latency capabilities Commscope expects 6 GHz 802.11ax products to be shown at the CES show in January 2020 and that FEM and filters are not available today but will be by year-end or early 2020. Newracomm is an 802.11ah (900 MHz WiFi) chip company that had won an award at the show. It claims to be an early leader in the market and based on comments made during presentations, we expect by 2H20, we will see systems and IoT services based on these types of chips. Celeno, a stand-alone WiFi chip company, demonstrated radar on WiFi chip capability - the company won multiple award at the show. The company expects that a year from now, its Doppler on WiFi will emerge in products from SPs such as BT, Orange, and Comcast. The Doppler service only consumes about 3-5% of throughput capability when using Doppler and enables some very interesting capabilities such as fall detection, proximity detection, people counting and arm gestures. ON Semiconductor's Quantenna group won an award at the show. Cambium, in a presentation, explained that it is looking at an expansion to CBRS, 5G FWA backhaul, and 60 GHz. Juniper Networks has been hiring in Europe as it expands its enterprise sales capabilities. It’s recently hired team made a positive impression on the audience. We tweeted about how great and fun the presentation by recent hire Jussi Nivikiemi’s presentation. Extreme Networks presented its view that Artificial Intelligence won’t replace IT workers - it will just make them better. A spectrum consultant - Webb Search - said that DFS is not working in the UK in 5 GHz and wastes a lot of bandwidth - most WiFi products don’t bother trying to operate one the spectrum covered by DFS. He advocated for using a database in the sky approach similar to what is being proposed for 6 GHz. UK's Ofcom representative, Christina Data, explained that it is researching both 5 GHz and 6 GHz as a comprehensive solution. Ms. Data acknowledged that DFS may have some challenges and was diplomatic in response to questions about how 6 GHz will emerge. Huawei advocated for an unpopular viewpoint (at a WiFi show) that 6 GHz device makers should register for IMT designation. In a panel that included German WiFi equipment vendor Lancom and Commscope, the other two vendors made counterpoints, including that this move to IMT will delay the rollout of 6 GHz by at least four years. Facebook is advocating a non-AFC approach to low power 6 GHz in the US market. We have learned through multiple sources that it has recently a demonstrated a prototype of an AFC, however. 650 Group. The Chris DePuy presentation hit on three topics: unlicensed and shared spectrum impact on WiFi, WiFi and WiFi-6 shipments, and WiFi semiconductors.
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ORAN and CBRS were the main themes at Mobile World Congress Americas, held in Los Angeles. I have to say, though, that unlicensed was the third most important theme, though it will emerge to the main stage in future years.
ORAN encompasses several topics woven together. ORAN is a set of common interfaces that describe how various devices in mobile RAN work together. ORAN may also represent a new way of building radio networks. Recently, new vendors are being invited to bid on major mobile network projects, including Mavenir, Altiostar, Parallel and others. And, the major market share players in mobile RAN, which include Ericsson, Nokia, Huawei, Samsung, and ZTE are being asked by operators to support ORAN. The incumbent vendors are responding in various ways: Samsung, a challenger in the market, has whole-heartedly embraced ORAN, while Huawei has only recently acknowledged the existence of ORAN. Ericsson and Nokia have embraced ORAN with the view to embrace and extend - in the sense that Microsoft used this term in the 1990s. Based on presentations made by Ericsson, Nokia, and Samsung, we expect that the incumbents, Ericsson and Nokia,will embrace ORAN but will establish a path to continue serving customers with the same vertically integrated business models of today. We are eager to see the results of mobile network operator bidding to observe how many startups win projects for wide scale deployment. CBRS. Today, CBRS is available in the US market and has been so for about a month. We had an interesting opportunity to moderate three panels on the stage at MWCa and found some very interesting indoor/campus uses for CBRS, including WiFi backhaul, secure/critical communications, surveillance, IoT/sensor monitoring. Since CBRS indoor spectrum generally allows for more output power than for WiFi, the range is better. We see this as a key advantage for CBRS users, though enterprises who take advantage of the so-called OnGo service must pay various monthly fees such as those for the SAS and potentially other ongoing services. We expect that CBRS will be successful in certain verticals. Unlicensed. We believe the existence of CBRS could uncork the value of unlicensed spectrum at 900 MHz, 5 GHz, 2.4 GHz, and 6 GHz. We are conducting significant research into each of these and other spectrums.  Huawei had record European revenue in 2Q19 for the Ethernet Switch market.
Both Data Center Switching and Campus Switching showed strong performance in Europe in the quarter despite the ongoing trade war. On an overall basis, Huawei’s Ethernet Switch results were flat Y/Y. China results for the company were down slightly Y/Y, but we note significant competition in China from local companies like H3C, Ruijie, Sundray, as well as several others. With over a dozen vendors reporting results already, Europe has performed inconsistently. A little more half of the vendors grew Y/Y while the rest had Y/Y declines. While we expect Europe to fluctuate, especially with vendors have unique country and deal exposure, the results are unique and imply interesting share results for the region when we publish the 2Q19 report. Today, Huawei announced 1H19 results were CNY401.3B, up 23.2% Y/Y. Carrier business 1H19 revenues were CNY146.5B, with 50 commercial 5G contracts and shipments of more than 150,000 base stations. Enterprise 1H19 revenues were CNY31.6B. Consumer Business 1H19 revenues were CNY220.8B, with 118M smartphone units, up 24% Y/Y. The company said "revenue grew fast up through May. [and that] we continue to see growth even after we were added to the entity list."
The fact that Huawei says it is still experiencing growth despite being placed on the US Entity List is important because it says that despite the efforts of the US to stymie Huawei, it is still growing. Huawei has typically provided semi-annual results to the public, so it is not odd that has not provided 2Q19 results, which were almost certainly weaker than 1Q19 results given the US efforts to slow Huawei. According to news reports and press and social media announcements by high-ranking members of US government, the US government has put Huawei on its so-called "Entity List" of the Bureau of Industry and Security (BIS). Our read on this is it similar to what happened with ZTE during C2Q18 last year, a move that severely curtailed ZTE's shipments and revenue until ZTE made concessions and was removed from the list. Many, but not all, Huawei products use technology only available from US suppliers. US-made semiconductors are the most significant Entity List target that Huawei needs to ship its products. Significant US semiconductor suppliers to Huawei include Intel, Xilinx, and Broadcom.
Huawei is such a significant vendor in many of our coverage areas, including Mobile Radio Access Networks (RAN), Ethernet Switching, and Servers, for instance, that we feel it is a good time to point out that 2019 market-level estimates may be at risk. Additionally, since Chinese cloud services players, like Baidu, Alibaba and Tencent cannot delay their capital infrastructure build-outs, alternate suppliers may benefit. We think it comes as no surprise to Huawei that the US is putting it under pressure. Just over a year ago, we attended the Huawei analyst summit (April 16, 2018) and its then-chairman said in response to the question "Will Huawei find alternate suppliers for data center products, "Today, Intel is the dominant player. Our point of view, we look forward to a more diversified landscape; but we work with Intel mainly now." Additionally, at Huawei's most recent analyst summit (mid-April 2019), the three main keynote speakers, all high-ranking executives of the company spoke about how much progress Huawei has made in developing in-house semiconductors and what its plans are to continue developing more. We do, however, think that despite Huawei's diversification efforts that it still has significant reliance upon key US chip companies. Huawei hosted 700 analysts and media participants in Shenzhen China last week to attend its annual analyst summit, nick-named HAS2019. The company's high-level message was simple - the company is an innovator and is moving down the stack into semiconductors and is partnering with and funding university projects to develop basic research. This year’s message was different from than the prior-year meeting, but several transformative events have occurred between this meeting and the prior year's, most notably the 2Q18 shipment ban on ZTE, the US / China trade dispute and US efforts to thwart Huawei’s participation in the 5G infrastructure of its allies. Interestingly, during HAS2019, the Apple and Qualcomm announced their chip-supply and patent settlement, Samsung announced its foldable phone (which has been met with criticism), and Ericsson & Swisscom announced that the operator went live with its 5G network. All three of non-Huawei events highlighted the importance of Huawei’s chips and innovation announcements. The company made announcements in its main keynote presentations on day one about seven different chip projects delivered recently or planned shortly. Chip-level is unusual for what are typically high-level presentations from a keynote-level presentation. These chips (seen in accompanying pictures) are:
The company shared more details about other chips in breakout sessions on the second and third days of the conference, as well. The point we are making, though, is that upper-level management provided significant detail about semiconductor developments at Huawei. Another relevant semiconductor-related point to make is that the company is de-emphasizing its reliance on Intel-based architecture and instead is focusing on devices such as ARM-based processors, as well as GPU, FPGA and NPU semiconductors. We would be remiss if we did not mention some of the system-level announcements and observations related to 5G that were made at the HAS2019 conference, which include:
even more follow on Today, Amazon announced that it will acquire eero, a consumer mesh WiFi equipment company that as of 3Q18 had 13% revenue share. In 3Q18, the consumer mesh WiFi market measured just over $150M, which was up just over 34% Y/Y. The number one player by revenue was NETGEAR in 3Q18, followed very closely by Google, who had retained the number one spot for the 5 quarters before 3Q18. Now, with Amazon's acquisition of eero, just three players will have well over 3/4th of the consumer mesh WiFi market. What's interesting here is that two Internet titans, Google and Amazon, are attempting to disrupt the consumer networking market that up till 2015 was dominated by hardware players such as NETGEAR, Linksys, TP-Link, D-Link (consumer WiFi vendors) and adjacent players such as Technicolor, Arris, Huawei, ZTE and Nokia (Broadband Customer Premises Equipment vendors).
So, what does it mean that now both Amazon and Google are battling for primacy in the home networking market? It is complementary to their interactive speaker business. Both Amazon and Google have introduced various hardware products for the home, but most successful have been both of their interactive speaker products, which for Amazon has been the Echo and Dot and for Google Home. These speakers are generally in an "always-on" mode, which allow them to listen to all sounds nearby, and which also means they are generally always connected to the WiFi devices in the home. By always being connected, these speakers consume much of the available WiFi bandwidth in the home, deteriorating the available spectrum for other devices. One obvious solution, which is being made available by wireless chip giant, Qualcomm, is to integrate WiFi chips with speaker chips. That's the direction that both Amazon and Google may pursue - to integrate Home with Google WiFi and Echo with eero. This will mean that multiple WiFi mesh devices will also represent multiple interactive speakers in the home, all while combating the over-use of WiFi spectrum in the home. These Internet giants can, and probably will, attempt to overwhelm the market with low prices, subsidized by primary businesses. We already see that Google's price for a 3-pack is 37% lower than eero's comparable system. Our working theory is that Google has been selling close to no margin and that eero has been experiencing a 30's percent margin. This is probably not good news for the following companies who either do have gross margins above 30% or we assume do, like NETGEAR, TP-Link, D-Link, and others mentioned above. Huawei Analyst Meeting Recap - a Big Focus on Artificial Intelligence and a Downplay of 5G4/16/2018  Eric Xu, Rotating Deputy Chairman of Huawei addressing audience questions at the Huawei Analyst Summit 2018 The main theme of the the Huawei HAS 2018 meeting keynotes was Artificial Intelligence and, secondarily, nearly ubiquitous networks connections across the world. Huawei expects 86% of enterprises to have experimented with AI by 2025 (<5% in 2018). It is leveraging AI across nearly all its products and will offer a full stack AI solution to all Huawei partners at its @Huawei Connect 2018 conference (Oct 10, 2018).
More specifcially, Huawei is using AI to elevate products & solutions to new levels: cloud, networks, devices, EI, SoftCOM AI, and Intelligent phones. The company's strategy has changed over time and is now AI-focused: 2006-2011: Single strategy: All IP 2012-2017: SoftCOM: All Cloud 2017+: All Intelligence: SoftCom AI (autonomous networks / services 2.0) - this reduces operating and maintence costs The company expects that networks will be 10x more efficient in the operation of equipment as a result of AI. By 2025, Huawei expects 440M AR/VR users, 40% of cars to be 'connected," 80% of users with access to mobile broadband, usage of 1 Gbps / user / day (versus .03 in 2018) and 20B connected devices worldwide. Connected Devices Forecast (Huawei) by 2025: 40B sensors and 100B connections. This thinking is based on data including that there are:
The company's product lines are very diverse; to wit, the company introduced a helmet for the blind, which will be available soon. Huawei expects NB-IoT (LTE-based IoT capability) to reach almost full coverage in China in 2018. Additionally, the company expects NB-IoT to reach 100 networks by the end of 2018 (versus 39 in 2017) and to be available on 1.2M base stations (from 0.5M in 2017) and to be connected to 150M connections (versus 10M in 2017). The company boasted about several developments:
Q&A after keynote: Mr. Eric Xu, Rotating Deputy Chairman of Huawei dodged several important questions relating to trade tariffs, cloud business unit revenue targets, growth rates of each major business units, specifics about AI full-stack claims made during the keynote, and instead focused generally on the AI theme. Xu did, however, however, answer a handful of questions that were quite interesting: Huawei won't acquire DRAM, Flash companies; and that 5G is not so revolutionary - it is just an evolution following LTE. Additionally, Xu mentioned that in 2H18, Huawei will launch end to end 5G solutions and by 3Q19, it will launch 5G capable phones. Xu said Huawei will continue to work with Intel on x86 for the foreseeable future. More Q&A specifics: Trade Tariffs and ZTE. (In a moment of levity, however, Eric Xu smiled when the words ZTE were mentioned - recall that a day earlier, ZTE was penalized by the US). We will focus on our customers and will ultimately survive. Cloud 1.5B by 2020, will you hit the target? Will offer cloud services to telco service providers. Huawei smartphones will leverage the Huawei cloud. Enterprise customers will consume cloud services such as video, computing. In future, trend will be enterprises will move to hybrid cloud and public cloud will take a major share. Huawei cloud provides compute/storage/networking to enterprises and government. 200K x86 servers in Huawei cloud. Revenue with external customers - won't share it with you - maybe . AI chipset question: We don't position chipset as a standalone business - won't sell to external customers. Will be used to differentiate Huawei products. Smartphone - we use multi-vendor strategy always; in other worlds; have multiple Qualcomm, NTK and others. Remain committed to multi-vendor strategy. Don't want vendor lock-in, however. If we only have one vendor, what might happen to our smartphone business, Xu asked. Enteprise business growth? Declined to comment on specifics, but said he encourages each to grow rapidly. How do customers get to 86% AI usage (the question was asked by an audience member by incorrectly referring to the statistic that was made during the keynote - specifically, Huawei said AI experimentation will be 86%, not AI usage)? Will give clearer answer at Huawei Connect 2018. For now, can share that we will use AI on ourselves first, then help customers on various functions such as finance, human resources, networks, etc. Supply chain - will you acqire your suppliers? We do joint innovation with suppliers to meet Huawei's needs; push multi-source strategy, however. Will not invest in DRAM, display, flash. 5G wasn't mentioned much in the presentation, why? We don't have as high expectations as some others; 5G is just one of many products we offer and is just a natural evolution from 4G. You don't have a fundamental difference between 4G and 5G - consumers just see faster speed and lower latency. LTE already support autonomous driving. Past couple years, governments have regarded 5G as too important. June 2018, will only address eMBB - faster speeds. 2019 - will have fully 5G compliant system that does low latency. 4G is pretty robust; we don't see 5G as a national coverage network - it'll just focus on city centers. However, once one carrier announces 5G, then all others must. 50% of Chinese have wireless connection capable of 4K but there are still no 4K stations. 2H18, end to end 5G solutions available. 3Q19, will launch 5G capable phones. Share trends for Huawei at operators. Revenue growth of telecom services is a challenging topic. This revenue growth topic is why titan operators express concern about moving to 5G; instead, Huawei thinks moving to improved intelligence will assist operators. Video will become more and more important as telcos become media companies too. Will AI become a privacy concern? Any technology has double-sided effects. With AI, some believe it can be dangerous. Xu believes in the wisdom of man. Look back to history of mankind, and our humanity can do same for mankind. Will Huawei find alternate suppliers for data center products? (Xu also smiled about this question before answering). Today, Intel is dominant player. Our point of view, we look forward to more diversified landscape; but we work with Intel mainly now. Nokia was bullish on its technology developments and cautious on telco capex. CEO Rajeev Suri described the telecom market as having tough market conditions and expects telco equipment market revenues down in 2018. He said the Swedish competitor pricing aggressively and that it will be difficult to keep share in China with 5G ramp. He said Nokia is executing on plan to grow non telco verticals – and it will take 3+ years before it is sizable enough to potentially offset telco challenges. He emphasized a key strength is its focus on cost reductions. He highlighted success in cable MSO market and that its FP4-based router will ship in a few days. Suri thinks 5G could roll out in China first, maybe tied with US. Nokia CEO's comments were quite similar about 5G rollout timing expectations compared to comments made at Huawei’s recent conference (2019 initial deployments; chipsets 2019; broadening deployments in 2020).
Some more details from Rajeev Suri's presentation: Ericsson. We were surprised that the CEO of Nokia took the opportunity to take some digs at Ericsson. He said that Ericsson is pricing aggressively; it also shared some quantitative statistics about competitive take-outs of Ericsson installed base. He argued that it has broadest portfolio in industry (fixed, software are examples). China. Two interesting comments about China – a) will be difficult to maintain share in China as 5G rolls out, b) China might be first to deploy 5G. Emphasized that Amazon Web Services is making a presentation at this conference. Said its new FP4-based routers are more efficient than any competitor and will be so for at least the next year. Other presenters made comments about 5G mainly. Here are some interesting comments: Artificial Intelligence. The company has a lot of network automation technology that is it working on but would not share details about this technology. We guess Nokia is more open with its customers and that it'll make announcements at MWC '18 in Barcelona. 5G Radio. Beamforming is a key technology that will be highlighted in 5G. Also, the company's separation of Stage 1 and Stage 2 MIMO processing makes the bandwidth needs from baseband to array be much less than competitors. Additionally, the company explains that its expected systems will have dramatically higher efficiency than competitors - again, the company kept its secrets here under wraps. Late 2018 will see first 5G deployments, going into 2019. IP/Optical. Basil Alwan, President IP/Optical division said the first FP4-based product went to production end of the last week. Major customers will take shipment before the end of this quarter. The company will ship its 57 Terabit router during 1Q18. SD-WAN will replace MPLS VPNs over time, perhaps at a rapid pace. Service Provider presentations: Amazon Web Services IoT. Satyam Yadav, GM of AWS IoT made a presentation at this meeting. The presentation focused on how Amazon's IoT software and its services would be used in a partnership with Nokia to deliver Amazon IoT services. Sprint. Ron Marquardt, CTO. He is not sure how much customers might pay for lower-latency connections available from 5G. Now that the uncertainty of the T-Mobile US acquisition is beyond us, Sprint says it is rapidly focusing on spending to upgrade its network. Sprint also said it plans to deal with fewer vendors in the future. Elisa. The Finnish operator presented data about its extraordinary data traffic growth and its per-subscriber data usage being far above competitors as well as other service providers in the world. This week, we attended the Global Mobile Broadband Forum, held in London, and found several interesting points we thought we would share. Much of the focus of the conference was about 5G wireless networks, and since the show was in London, many of the service providers who we met with and listened to were European. The sponsor of this event was Huawei.
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CHRIS DePUY
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