One man’s misfortune is another man’s fortune – and the same holds for companies. Take Huawei and Samsung. The battering the Chinese tech company is suffering in the world’s largest economy presents its South Korean rival with an opportunity.
Samsung and Huawei are the only two firms to provide total end-to-end 5G solutions, including chipsets, base stations, virtualized solutions and the smartphones that run over fifth-generation mobile telecommunications, or 5G, networks.
For Samsung, telecommunications network equipment, as supplied to network carriers, has customarily been a minor part of its business compared to memory chips and mobile phones – two sectors where it leads the world.
Last year, Samsung held only a 6.6% share of the overall equipment market, compared with Huawei’s 31%.
But now Samsung, benefiting from first-mover advantage in the 5G space – Korea unleashed nationwide commercial 5G networks in April – is focusing its formidable corporate energies on the 5G hardware sector.
It faces a tough fight ahead.
Last month, 5G services started in the massive Chinese market, which will provide a mega boost for Huawei. European players are also winning global contracts as some 50 global markets prepare to roll out commercial 5G services.
All this suggests is that after 2019, the pioneering year for 5G, 2020 will be the crucial year for players to gain global traction and assert dominance.
Getting big, moving fast
Kim Young-ki, the head of Samsung Electronics’ network business division, said last June that Samsung would capture more than 20% of the global 5G equipment market by 2020. And since Kim’s statement, Samsung has made major inroads.
It now supplies 5G equipment to two of the three of the world’s first 5G service providers, SK Telecom and KT, both in South Korea, where nationwide 5G services kicked off in April. Samsung also supplied the first 5G-enabled phones.
Beyond South Korea, Samsung provides 5G gear to Verizon and Sprint in the US, which both run limited 5G services. Test supplies of Samsung 5G equipment have been provided to Telefonica of Germany, as well as AT&T and T-Mobile of the US.
However, Samsung declined to comment on how those tests are proceeding.
In October, Samsung won a contract to supply 5G mobile network equipment to KDDI, Japan’s second-largest telecommunications company. It did not reveal the details of the deal, but local media reports said the 5G equipment supplied by Samsung was expected to be worth US$2 billion over the next five years.
Also in October, Samsung showcased advanced LTE and 5G technologies used in combination in dual-connected mode networks with Reliance Jio Infocomm of India at the India Mobile Congress 2019. Experts say India is not ready to launch 5G services, but Samsung is keen to pave the way in cooperation with Jio.
“Samsung has been working in close cooperation with Jio to bring a digital transformation including transition to 4G throughout India for seven years,” Paul Kyungwhoon Cheun, Executive Vice-President and Head of Network Business at Samsung, said in a press release. “Samsung and Jio will continue to join forces in bringing next-generation innovation across the country, harnessing the full 5G potential in driving further growth of digital India.”
All this is adding up.
According to the Ministry of Science and ICT of Korea, Samsung took 36% of global sales of 5G network equipment in the first quarter of this year – the top position – followed by Ericsson and Huawei, both with 28%, and Nokia with 14%.
That surge shows how fleet of foot Samsung Electronics, which has customarily concentrated on semiconductors and consumer digital devices, has become in the 5G space.
Last year, Huawei took top spot in the overall global telecommunication equipment market with a market share of 31%, followed by Ericsson with 29.2% and Nokia with 23.3%.
Even second-tier Chinese player ZTE bit of a bigger chunk than Samsung, recording 7.4% of the global market share against the South Korean firm’s relatively paltry 6.6%.
Looking to the future
Samsung’s initial success story relies on its dominant positions in the South Korean and US markets, where 5G services were launched earlier than in other regions.
Amid a trade war with Beijing, Washington blacklisted Huawei – which it accuses of building spying technology into its systems – and pressed allies not to use Huawei products in their networks.
“Now, Samsung is posting a higher 5G equipment market share than its competitors as only a few countries, such as Korea and the US, have commercialized 5G service,” an industry expert told Asia Times.
“We need to see how Samsung performs in the future … it is not likely to maintain its current position as more and more countries commercialize 5G services.”
The expert added that 5G services will be launched in about 50 countries next year, creating new battlegrounds for the sector’s players to fight on.
Among those angling for dominance, it is hardly game over for Huawei, which is set to win big from domestic 5G. And despite Washington’s ban, the Chinese tech giant has so far won 50 contracts with countries including Switzerland, the United Kingdom, Finland and even South Korea, according to a media report that quoted Ryan Ding, the president of Huawei’s Carrier Business Group.
Finland’s Nokia is also making moves. Nokia said in a June press release that it had won 42 commercial 5G deals with operators around the world – 22 of them with major customers such as T-Mobile, Telia Company and SoftBank.
“Including these agreements, Nokia’s 5G deals, trials and demos total over 100 5G customer engagements to date,” the release stated. “Since the announcement of the 30th commercial 5G contract at the end of March, the company has seen an average of one major contract win each week.”
And Sweden’s Ericsson has also announced it had won 30 publicly announced 5G contracts.
2020 the critical year for 5G
For all these reasons, Samsung faces a challenging year ahead.
Experts say Huawei remains the major threat in the sector. It is armed with both price competitiveness and technological edge as the holder of the largest number of telecommunications equipment patents.
Huawei is also extremely well positioned thanks to the launch of Chinese 5G services early this month.
Gaining early traction in major markets is crucial.
“Telecommunication service providers tend to keep their relations with existing suppliers once their network is set,” Kim Jong-ki of the Korea Institute for Industrial Economics and Trade told Asia Times. “It’s too early to speak of the future of Samsung’s 5G telecommunication business, but Samsung indeed has the potential to be a strong contender.
“Samsung’s participation in the world’s first commercialization of 5G network in Korea is a valuable asset for Samsung, and Samsung has R&D power and enough patents in the key area of 5G telecommunication – though its total number of patents does not match Huawei’s,” Kim added.
Pundits say that in addition to Samsung’s first-mover advantage, its position as an end-to-end 5G solution provider and its immunity to security concerns in the US are further strengths. Washington’s blacklisting of Huawei offers Samsung a particularly juicy opportunity to seize a major bridgehead in the world’s largest economy.
“Samsung’s telecommunications equipment business is expected to perform better in the 5G era [than in previous eras] as it took the initiative in the newly growing 5G market, as seen in its global market share in the first quarter of this year,” the expert said. “Now, Samsung’s position looks different from that in the 4G gear market.”
Moreover, there appears to be backing for aggressive moves into the sector at the very pinnacle of the electronics conglomerate – a critical factor in Korea’s family-dominated business groups.
“Samsung’s changed stance on the telecommunication equipment business is also expected to enhance competitiveness,” the expert added. “Lee Jae-yong, the heir of the Samsung business group, has shown a will to promote the business.”