Samsung challenged the position of telecom giants Nokia, Ericsson, and Huawei after signing a $6.6 billion network equipment supply deal with Verizon this week. Will this spark a new revolution in the telecom infrastructure market? Can new players now have a fair chance in the 5G market? Let’s find out.
The global race for 5G just got far more exciting. Already populated with established players such as Nokia, Ericsson, Huawei, and ZTE, the 5G RAN market witnessed a strong competitor for the existing players this week. On September 4, 2020, Samsung sealed a $6.65 billion 5G deal with Verizon Communications. One of the company’s biggest deals, it now places Samsung directly in competition with global telecom giants, including Nokia and Ericsson. According to the agreement, the company will supply Verizon with 5G network equipment until 2025.
In a public disclosure statement, Samsung statedOpens a new window , “Samsung Electronics America Inc., a fully-owned subsidiary of Samsung Electronics Co., Ltd. signed a radio network solution supply contract with Verizon Sourcing LLC on September 4, 2020.†The term of the contract is June 30, 2020, to December 31, 2025.
Samsung has been working hard with various U.S. operators on 5G advancements. Previously, Samsung has supplied 4G and 5G technology to AT&T and Sprint. More recently, in August 2020, Samsung played a vital role in the 5G Verizon’s 5G virtualization milestone. Verizon’s massive confidence in Samsung’s 5G equipment elevates Samsung’s position in the global RAN market and might help Samsung do lucrative business with other telecom companies globally.
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How Does This Deal Affect Other Telecom Companies?
This deal is a massive setback for the Finnish telecom company, Nokia, which has been Verizon’s network supplier for decades. In early July 2020, there were speculations that Verizon might drop Nokia for Samsung. Rosenblatt Securities’ managing director and senior analyst, Ryan Koontz, mentionedOpens a new window , “Verizon is close to replacing Nokia with Samsung for its 5G radio access network needs and might win a contract at $1.5B per year for five to seven years.â€
With this deal in place, Nokia might have to accelerate its 5G infrastructure solutions and adopt emerging technologies, including AI, machine learning, and software-defined tools, to deliver cost-effective and innovative solutions to mobile operators.
This deal also comes as a major blow to the Chinese telecom company, Huawei Technologies, which is currently surrounded by escalating geopolitical issues after being banned in the U.S. and U.K. In May 2019, President Trump signed an executive order that banned U.S. firms from doing business with Huawei. More recently, in August 2020, the U.S. Commerce Department imposedOpens a new window new sanctions on Huawei, restricting the sale of chips using U.S. software or technology to Huawei. The new restrictions further diminished Huawei’s global 5G ambitions.Â
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Moreover, in July 2020, the British government decided to ban Huawei equipment from its 5G networks and asked its cellular companies to remove Huawei equipment and technology by 2027. As Huawei continues to wrestle for a place in the 5G market, Samsung has succeeded in securing a strong position in the U.S. market.
To date, Nokia, Huawei, Ericsson, and ZTE have been major players in advancing 5G technology, but Samsung’s big win will seize their position in the market. Moreover, with Verizon’s interest in Samsung, it seems like the 5G market might witness a shift in the trend and create a competitive field for entrants and other infrastructure providers. Only time will tell if the Samsung and Verizon deal will boost small and medium businesses in the 5G space.Â
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