Several analysts have published reports with their estimates and forecast of small cell shipments recently. Some were released quietly, and others with strong headlines. We’ve looked behind the hype and spoken to a few people in the industry to come up with a considered view.
Informa publish a quarterly “State of the Nation” report for the Small Cell Forum. It’s available free to download and lists the current network operators offering commercial service. Dimitris Mavrakis, principal analyst at Informa and working with the Informa forecasting team, predicted a total of 6.6 million small cells would be installed by the end of 2012. Simon Saunders quoted a figure of 3.8 million deployed today (speaking at Small Cell World Summit last month) pointing to significant growth during the year.
Meanwhile, ABI Research were more cautious in their latest Enterprise and Consumer Femtocells Report, predicting 5.3 million will be deployed by the year end. They estimated that 2012 shipments would match the previous year, at around 2.4 million. Their breakdown analysis includes both by revenue than just numbers.
Across at Infonetics, Richard Webb reinforces the view that revenues are static but points to significant cost reductions. During Q1 2012, shipments grew by 14% while revenue dipped by 2.7%. This translates to a much lower cost price per unit, which should help boost growth in the future.
Some key points emerge:
Half of small cell revenue today is for CDMA femtocells
Which is perhaps surprising, since less than 10% of the world’s mobile connections use CDMA today (90% are on GSM/UMTS/LTE family according to 4gamericas).
Airvana climbed to the top of the leaderboard in femtocell revenues. It highlights that the cost of these units is much higher than for UMTS, and that takeup in the USA continues to be strong. This is partly due to the extra complexity of a CMDA femtocell. By contrast, the heavy investment by silicon vendors for UTMS system-on-a-chip femtocells has dramatically reduced their cost.
Sprint has taken a strong line with femtocells for many years, being the first to deploy them commercially, and continues to market them heavily. Verizon, the other major CDMA network in the US, has been much quieter about their solution. They offer Samsung femtocells to dissatisfied customers who may leave their network, but don’t actively promote them. Since I believe Verizon are Samsung’s only customer and that Sprint only buy Airvana (and a few Ubee/Airwalk) femtocells, it suggests that Verizon is distributing quite a few.
Of course, this doesn’t mean that CDMA femtocell vendors are necessarily making a larger profit than their UMTS counterparts. The more limited competition should allow them to negotiate better margins. Sprint’s stated plans including doubling its residential and enteprise femtocell rollout during 2013. But in the longer term, the more limited CDMA market couldn’t provide the huge market size predicted for UMTS or LTE.
The supply chain suffered a blockage this year
It appears that some large orders delivered six months ago filled up warehouses with stock during Q1. Having ramped up production, component suppliers may have been surprised when the orders dried up. ABI believes silicon shipments were down 30-40% during Q1 compared to the previous year. Now that the stock has burnt off (been shipped), we should expect some fresh orders to come through the pipeline. These would be based on the latest chipset designs, pushing low cost product through to consumers.
High Growth rates continue to be forecast
With a femtocell price point dropping to remarkably low levels (when ordered in high volumes) that network operators were originally asking for, there seems little to hold back further growth. With over 40 networks now supporting femtocells, the technical constraints are no longer an issue. It will take the more innovative networks to make the major marketing push to deliver the volume growth that the industry is looking for, but there is no reason to hold back.
Having gone through the technical and product integration, system suppliers such as Alcatel-Lucent and NEC are well positioned to capture this growth. Major operators such as Vodafone and Telefonica have refreshed their femtocell product with the latest (lower cost) devices, and so are well positioned to ramp up should they choose.
The bulk of the longer term growth is in Enterprise?
Infonetics expect a radical shift of the global market away from residential (74% down to 30%) while public space femtocells grow to 25%. They foresee dramatic growth in the Enterprise sector which grows to almost half the market.
Data traffic forecasts highlight that most of the future growth is based on indoor, rather than outdoor use (you don’t see too many people walking down the street watching videos….yet). This leads to an assumption that it will be indoors, where it is more difficult/expensive to penetrate into buildings from outdoor basestations, that will form the largest part of the market.
ADI suggest the lack of growth this year may be to attention shifting from indoor to outdoor metrocells. I would say that the industry is maturing from residential femtocell to operator deployed, which includes enterprise, metrocell and rural.
Many of these estimates exclude metrocells
It’s important to realize that not all these forecasts are directly comparing like-for-like. ABI Research specifically look at enterprise and residential femtocells, excluding the public outdoor metrocells and/or rural femtocells we’ve seen come on the market recently. Some analysts quote shipments rather than deployments. Growth projections may refer to units or revenue.
All analysts are making educated guesses based on a range of criteria and assumptions. For those wishing to understand their conclusions more clearly, I’m sure each would be happy to clarify their assumptions and reasoning in detail. You can always buy their reports or ask for their advice. My thanks to those who patiently answered my questions on this over the last week.
Recently published analyst small cell reports: