Telco vendors navigate major market shifts as 5G winter sets in Telco spending downturn triggers vendor consolidation and operational overhaul; cloud demand stokes alliances as Open RAN gains traction amid mixed outlook

Telco vendors navigate major market shifts as 5G winter sets in Telco spending downturn triggers vendor consolidation and operational overhaul; cloud demand stokes alliances as Open RAN gains traction amid mixed outlook

This brief analyzes demand for network infrastructure solutions (hardware, software, and services) in the telecommunications (telco) industry as of mid-2024. The brief addresses prospects for spending growth, vendor market share dynamics, and what strategies vendors should pursue to cope with the current market environment.

The telecom vendor market is navigating a turbulent landscape shaped by significant shifts and challenges. In 2023, telco network infrastructure (telco NI) vendor revenues declined sharply, down 9.2% annually to $211.8 billion, marking the steepest drop at least since 2014. This downturn reflects the completion of 5G buildouts in major markets like the US, China, and parts of Europe, following a period of intense investment. As telcos scale back spending amid economic slowdowns and high interest rates, operators face capital constraints, intensifying vendor market pressures.

Adding to the complexity are geopolitical tensions disrupting supply chains and market access, notably impacting vendors like Huawei and ZTE, due to security concerns. These challenges have prompted telcos to reevaluate vendor partnerships to ensure alignment with national security priorities, further reshaping market dynamics. Meanwhile, the rise of webscale cloud providers – AWS, GCP, and Azure – is transforming telecom infrastructure through cloud migration, AI integration, and advanced automation, posing both competitive threats and partnership opportunities for traditional vendors.

The top three telco NI vendors remain the same as for the last few years: Huawei, Ericsson, and Nokia, with aggregate share totaling just under 38%, unchanged from 2022. Despite this apparent stability, significant market shifts are unfolding.