Huawei, Ericsson take majority of growing evolved packet core market

The Evolved Packet Core (EPC) market revenue grew 4% quarter-over-quarter in 2Q 2018, according to a recently published report from Dell'Oro Group.

Ericsson's and Huawei's combined market shares increased to over 60%.

"In spite of the U.S. ban on ZTE, the EPC market revenue grew in 2Q 2018," says Dell'Oro Group senior analyst David Bolan.

"Ericsson, Huawei, and Nokia increased their share in the quarter with quarter-over-quarter growth rates exceeding the average 4%. Growth in EPC is being fueled by the usual growth in LTE subscriber growth, data traffic growth driven by video, and the beginning stages of the migration to 5G. Most of the service providers launching their 5G networks at the end of 2018 and into 2019 will upgrade their EPC rather than invest in a new 5G core.

In 2Q18 the Asia-Pacific region had the largest share of EPC session shipments followed by Europe, Middle East, and Africa, North America, and Latin America.

"Huawei gained the most share in the Asia Pacific region with over twice the share of Nokia or Ericsson who ranked second and third, respectively. However, the North America market is where most of the activity has been in preparing the EPC for 5G launches for as early as the end of 2018," Bolan adds.

The Dell'Oro Group 'Wireless Packet Core Quarterly Report' offers complete, in-depth coverage of the market with tables covering manufacturers' revenue, average selling prices and sessions shipped for Traditional Packet Core equipment (GGSN, SGSN, PDSN) and Evolved Packet Core equipment (MMEand PGW/SGW).

Key takeaways:

• The Evolved Packet Core (EPC) had a revenue decline Y/Y of 5% and a gain Q/Q of 4%. The market grew, in spite of the U.S. ban on ZTE and its shrinking revenues for the quarter. Ericsson, Huawei, and Nokia increased their share in the quarter with Q/Q growth rates exceeding the average 4% Q/Q.
• NFV is continuing to grow as service providers upgrade their packet core in preparation for 5G. Initially, deployments of 5G will use the EPC. The Y/Y revenue growth was over 70%. Huawei was up sharply Q/Q, just barely taking the vendor lead over Ericsson. The NFV market is still a very small market and large EPC upgrades by Tier 1 service providers can swing the vendor shares from quarter-to-quarter.
• The EPC core specifications have continued to evolve to enable control plane and user plane separation (CUPS) and dual-connectivity (simultaneously connecting to two base stations). CUPS, as the name implies, enables the separation of the control and user planes facilitating the ability to distribute the user plane functions to as far as the edge of the network to meet the needs of low latency requirements for data-intensive real-time communications.
• The predominant 5G NSA architecture being selected by the SPs is what is commonly known as Option 3x, formally known as E-UTRA-NR Dual Connectivity (EN-DC). The 4G RAN (eNB) acts as the master node while the 5G RAN (gNB) is the secondary node. This architecture allows the RAN to connect to a variety of user equipment (UE) devices. The UE can be a 4G only device, a 5G only device, or a dual-mode device cable of 4G and 5G. This architecture provides the SP with the most flexibility is serving a variety of user devices with the maximum speed while getting to market faster with 5G without investing in a 5G core.