LTE Expected to Dominate Wireless Infrastructure Spending by 2013

January 31, 2012 -- The wireless technology known as 4G Long Term Evolution (LTE) is expected to claim the lion’s share of wireless infrastructure capital spending next year as mobile carriers definitively migrate to that next-generation standard.

Global capital spending on LTE technology is projected to reach $24.3 billion in 2013, nearly triple the $8.7 billion of 2012, according to an IHS iSuppli Wireless Communications topical report from information and analysis provider IHS (NYSE: IHS). LTE infrastructure spending in 2015 will rise to $36.1 billion, compared to just $9.0 billion for 3.5G, as presented in the figure below. This rapid growth is expected to allow LTE to overtake 3.5G, which will end its five-year run this year as the dominant category in wireless infrastructure gear spending. In 2013, 3.5G infrastructure technology will generate $19.8 billion in revenue.

 

 “While 3.5G remains the dominant air interface technology in the mobile infrastructure market, the 4G LTE space has been gaining momentum,” said Jagdish Rebello, Ph.D., director and principal analyst for communications and consumer electronics research at IHS. “This trend started in the second half of 2009 when some wireless operators in Europe, North America, Japan and South Korea started to deploy LTE technology. The number of mobile network operators that are trialing, deploying or commercially operating 4G LTE networks now has grown to about 200 worldwide, up from 160 in 2010. And such widespread support will drive carrier spending on LTE to surpass 3.5G by next year.”

On the Road to LTE For infrastructure manufacturers and semiconductor suppliers, LTE represents a strong revenue growth potential and an opportunity to develop long-term relationships with carriers. To this end, manufacturers are developing hardware solutions labeled as “Any G to LTE” that support easy software upgrades to LTE, while maintaining backward compatibility with the legacy 2.5G and 2.75G wireless technologies still in use in some parts of the world.

“The vendors that will win in the transition to 4G will be those that can demonstrate cost-effective, upgradable solutions capable of delivering performance as defined by the LTE specifications,” Rebello said.

Supporting peak data rates that are significantly faster than the maximum speeds of 3.5G/3.7G technologies, LTE represents an all-Internet Protocol networking technology. LTE also offers advantages like reduced latency, flexible bandwidth provisioning, and lower cost-per-data-bit transmitted. These features will be the key ingredients to supporting the exponential data traffic growth on networks expected to occur during the next few years.

Silicon Value Like the vendors now competing in the 4G equipment area, silicon suppliers also must be ready to meet the challenges and demands that LTE solutions place on semiconductors and hardware architectures, with suppliers able to deliver price-competitive solutions.

In particular, the 4G networks of the future must evolve to more heterogeneous architectures such as metro cells, which will be used to augment coverage or fill holes in areas of high data traffic. These metro cells—also known as small cells—will be used alongside Wi-Fi hotspots to provide coverage in public spaces, IHS believes.

At present, semiconductor suppliers are trying to address the challenge of metro cells with solutions that reflect their heritage. For instance, Texas Instruments Inc. and Freescale Semiconductor Inc. are targeting the metro cell market with digital signal processing (DSP) solutions. Meanwhile, companies like PicoChip Ltd. and Broadcom Corp. are trying to address the same issue with scaled-up versions of their system-on-chip solutions for femto base stations.

To be sure, such solutions will require tremendous flexibility in networking equipment, and the solutions likely will have to be tailored to the needs of the individual operators. And even for a given operator, such needs will vary by location.

Read More > 2011 Mobile Data Explosion Driving Transition to Heterogeneous Networking Architectures and Small Cells

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