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24 May 2022

Airspan documents impact of semiconductor shortage on Open RAN

The impact of global component shortages, especially semiconductors, on the telecoms industry has been well documented, affecting service roll-outs, availability of devices, and prices across the board.

Now Airspan Networks has outlined how the shortages have struck its sector of Open RAN, after reporting Q1 2022 revenues of $37.6m, a whisker below analyst expectations but 18% down year-on-year and 25% below the total for the previous quarter. This implies not just that the supply chain crunch has had an impact on a company that had been growing quickly, but that this is still intensifying.

Open RAN vendors are no more exposed than others to the supply chain problems, but the situation is particularly frustrating for a nascent sector enjoying strong growth that is being suppressed as a result and making it harder to maintain the momentum needed to make serious inroads against the established infrastructure companies with a vested interest in keeping the field at bay as long as possible. Airspan is different from most of the emerging Open RAN players as a public listed company obliged therefore to publish detailed results with explanations for losses or declines in revenues and profits.

This public listing came about in August 2021 when Airspan merged with a special purpose acquisition company (SPAC), at a time when business was still growing amid predictions revenues would rise by 47% to $254m for that calendar year. In the event, the total fell short of that, in the end standing at $177.3m, admittedly 3% up year-on-year but 30% below the stated target before the IPO.

Yet the company would have achieved even higher revenues than the IPO forecast had it been able to fulfil all its orders. The upside for the company is that, despite the larger impact of supply chain shortages across the industry, associated with the Covid-19 pandemic compounded by geopolitical factors, its order book remains healthy.

The company has over 1,000 customers, including some Tier 1s like Telefónica, Turkcell, Reliance Jio, Softbank and Rakuten Mobile that are all keen Open RAN advocates, as well as partnerships with key players such as Cisco and HPE for Open RAN-based private networks. It reports continued proliferation in demand for private enterprise networks, as well as fixed wireless access services, claiming that it is actively chasing business worth $3bn.

“We continue to expand and diversify our customer base,” said Glenn Laxdal, president and COO of Airspan. “Our momentum in private network deployments continues as well, particularly in the USA and Europe.”

The problem is that it could only fulfil a small proportion of current prospective orders if they all came in. The company said that it had made changes to circuit board design to circumvent these issues as far as possible but was unable to stop most first quarter shipments slipping. It does predict these measures will bring more consistency to shipments in the second quarter, but that remains to be seen. More generally, Laxdal anticipates supply chain challenges easing toward the end of the year and into 2023, but now that depends on geopolitical events as well as lingering impacts of the pandemic in some key countries, such as China.

Ironically, Open RAN has been promoted for improving supply chain diversity and security by creating a healthy and expanding ecosystem of suppliers for the different aspects of a 5G network, including radio units (RUs), distributed units (DUs), centralized units (CUs), and core and server hardware, all stitched together with interoperable hardware components and virtualized software. That promise will look hollow if vendors are unable to fulfil orders in a timely way, although they argue and certainly hope that the current constraints are only temporary.

For vendors such as Airspan that were doing well, it is frustrating at a time when all players are fighting for a decent share of what is still a small market, accounting for only a few percentage points of the overall RAN and core, whose revenues are still dominated by the big three or four.

Many of the challenger suppliers are either privately owned or part of a larger company, and as a result have not spelt out in detail what impact shortage of semiconductor components is having on their Open RAN businesses. Among these other players is Parallel Wireless, owned by Canadian telco Mitel. Another is Japan’s NEC, for which Open RAN is only a small part of the overall business – but which has acknowledged the overall impact of supply constrictions, and taken measures to mediate it. For example, in October 2021 NEC announced, jointly with Japanese telco NTT, a Security Transparency Assurance Technology to reduce supply chain security risks by various measures, including sharing system configurations and risks posed by network devices and information systems that constitute ICT infrastructure, including for 5G.

An interesting case is that of Altiostar, now part of Japan’s Rakuten, which launched Rakuten Symphony last summer to promote and market its cloud-native and Open RAN platform worldwide, monetizing it through services. This has led to the most comprehensive Open RAN ecosystem assembled so far, which paradoxically attracted criticism for not, as a result, being truly open, as it could be effectively imposing a walled garden comprising interoperable components but all controlled by one company.

In practice though this will appeal to some operators, since, providing it adheres to Open RAN standards, there is at least the prospect of bringing other vendors in and this does provide some leverage. It may not necessarily though insulate the telco against supply chain constraints any more than if they had gone to one of the traditional vendors, primarily Ericsson, Nokia, Huawei or Samsung (and of course, Nokia and Samsung are both promising Open RAN support).