Japanese Mobile Infrastructure Market Drops 16 Percent YoY Despite W-CDMA Surge

Japanese Mobile Infrastructure Market Drops 16 Percent YoY Despite W-CDMA Surge
By Stéphane Téral, senior research director, mobile infrastructure and carrier economics, IHS Markit
Bottom Line
·         In the first half of 2016 (H1 2016), the mobile infrastructure market in Japan dropped 16 percent year-over-year, to $1.5 billion
·         There was a solid jump in wideband code division multiple access (W‑CDMA) baseband unit (BBU) shipments in H1 2016
·         The LTE hardware market in Japan is forecast to decline at a compound annual growth rate (CAGR) of -11.2 percent from 2015 to 2020

Our Analysis
As we anticipated, the Japanese mobile infrastructure market saw a significant year-over-year drop in H1 2016. The market was dragged by CDMA2000 and Long Term Evolution (LTE) -- confirming the continuous decline in hardware rollouts. Software-based carrier aggregation implementations, meanwhile, remained steady.
Leading vendors such as Nokia Networks, Ericsson, NEC and Fujitsu experienced double-digit revenue declines in H1 2016, due to a drop-off in LTE deployments.
Some carriers are deploying loads of W-CDMA BBUs in anticipation of the Tokyo Olympics
Although Japan is a frontrunner in 5G, 3G revenue swelled 11 percent year-over-year in H1 2016, driven by W-CDMA. LTE sales, in contrast, declined by 20 percent.
W-CDMA BBU-only shipments were strong in H1 2016, propelling a 43 percent increase in revenue from the same period a year ago. And there were no remote radio heads (RRHs) to be seen.
We believe that NTT DOCOMO and, to some extent, SoftBank Mobile are beefing up their 3G networks in anticipation of the 2020 Tokyo Olympics. The idea is to ensure that tourists and other foreign visitors can roam on 3G to use their devices that may not necessarily roam on 4G. Consequently, they are building the foundation for now and will gradually add RRHs when demand surfaces.
Service providers know that they are going to have to keep their 3G networks alive for some time to support tourists visiting Japan -- particularly during the Olympics.
Long-term outlook for LTE
Through 2020, Japan will be in a transition mode characterized by 3.5 GHz time division duplex (TDD) LTE capacity upgrades and 5G preparations. As a result, IHS Markit forecasts the LTE hardware market in Japan to decline from $3.2 billion in 2016 to $1.9 billion in 2020.

Japanese Mobile Report Synopsis
The biannual IHS Markit Japan mobile equipment report provides market size, vendor market share, forecasts through 2020, analysis and trends for 3G (W-CDMA, CDMA2000) and 4G LTE (E-UTRAN, EPC) mobile network equipment and subscribers in Japan.

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