Samsung Electronics Company received a boon from U.S. sanction on Chinese telecommunication equipment maker Huawei Technologies by landing a $6.44 billion contract to supply 5G network solutions to US wireless giant Verizon over the next five years. This is a major win for the South Korean firm in the next-generation 5G network market.
The global prospects of Samsung for its network business have improved following U.S. sanctions on its bigger rival Huawei. Verizon CEO Hans Vestberg said that Verizon does not use any Huawei equipment. The company had already been a Samsung customer before the order. This deal would help the company expand its telecom equipment business abroad, potentially giving leverage to negotiate with other countries.
In July 2020, Britain had ordered Huawei equipment to be purged completely from its 5G network by the end of 2027, adding which requires bringing in new suppliers like Samsung Electronics and Japan’s NEC.
Last year, Samsung acquired a 3 percent market share of the global total telecom equipment market and was behind Huawei (No. 1) with 28 percent, Nokia 16 percent, Ericsson 14 percent, ZTE 10 percent, and Cisco 7 percent. It is released in a market search report by Dell’Oro Group market research firm.
In the previous month, the Trump administration revealed plans for auctioning the spectrum, which was previously dedicated to military purposes for commercial use (starting in mid-2022) for ramping up fifth-generation network coverage in the United States.
The Billion-Dollar Deal
The billion-dollar deal, which is Samsung Networks’ biggest contract to date, will see the company supply Verizon with 5G network equipment over the next five years, the company confirmed a regulatory filing to the Korea Exchange (KRX), reinforcing its position as a challenger to the dominance of Nokia.
Samsung which is also the world’s largest memory chip and electronics gadget maker has been pushing hard to expand its market share in the 5G equipment market and investing in sixth-generation mobile networks. The company is a pioneer in mmWave, sub-6, and virtualized RAN innovation, and a leader in end-to-end 5G solutions — from chips to networks to devices. They are excited to continue delivering on breakthrough network technologies that will expand what’s possible through 5G.
Samsung has been the founding member of Open RAN Policy Coalition, a group largely thought to be an “anti-Huawei” coalition. Networks based on open RAN technology, which opens the interfaces between different parts of the radio access network, are increasingly seen as the strategy to inject competition into a market dominated by one Chinese and two Nordic vendors. Both Samsung and Nokia have recently boasted compatibility with open RAN specifications. Yet neither has had much to shout about commercially so far. Regardless of open RAN, Verizon is likely to have been attracted to Samsung’s widely recognized expertise in several 5G areas – something the South Korean vendor was eager to highlight in its statement on the deal.
Samsung Electronics has entered into contracts with Verizon, AT&T, and Sprint in the U.S. and Japan’s KDDI to provide its 5G equipment. This was done post the introduction of the 5G network, for the first time in the world, in South Korea last year. It gained a much-needed mid-band spectrum for its 5G rollout after emerging among the top winners in a recent U.S. auction of airwaves. Industry watchers expect the contract would help Samsung expand its market share in the global 5G network market in which it currently commands between 10 percent to 15 percent.
The Road Ahead For Nokia
Nokia’s insistence that it remains a critical part of Verizon’s 3G and 4G systems suggest the operator might use a so-called “overlay” to introduce Samsung without ditching its Finnish rival. They remain a top-three global customer and our strategic partnership includes a wide range of areas such as radio access, IP routing, software, fixed networks, services, and more. BT, Vodafone, and many other European operators say they must buy their 4G and 5G products from the same vendor to maximize performance.
An overlay alternative, promoted by Samsung, would take advantage of an interface called X2 to support handover between 5G gear from one vendor and 4G equipment from another. Whatever the performance downsides, this could allow Verizon to avoid a costly swap-out of Nokia’s 4G equipment. That would mark a step toward a more open and “disaggregated” network, whose components are supplied by a multitude of vendors.