- It’s a dark time for the telecom industry
- 5G hasn’t provided the ROI that everyone needs
- Layoffs are occurring across the board, and Samsung is the latest vendor to reconfigure who’s doing what
Samsung Electronics is cutting jobs in its network division, shifting about 700 people out of its 4,000-employee network group and into other departments, according to media reports.
The move, made June 17 and reported last week in Business Korea, is in response to the cyclical nature of the global telecom market, which is going though a “5G winter” period that affects the entire industry.
Samsung declined to comment to Fierce on the report.
The slowdown in 5G spending is pretty well understood across the industry as operators shift into lower gear on the 5G deployment front. In the first quarter of 2024, AT&T’s capital expenditures were $3.8 billion compared with $4.3 billion in the year-ago quarter. For the full year 2024, Verizon allocated $17 billion to $17.5 billion in cap ex, down from $23 billion in 2022.
But the down shifting came faster and more pronounced than some expected.
In the U.S., whenever a new generation of wireless technology gets rolled out, there’s typically a period of aggressive rollouts followed by a “chill out” time. In the case of 5G, operators spent a ton of money on spectrum and aside from fixed wireless access (FWA) success stories, they aren’t getting a whole lot of return on investment (ROI) from deploying it.
Indeed, the 5G slowdown has been brutal to Samsung’s Scandinavian rivals as well.
Last year, Nokia started slashing up to 14,000 jobs in an effort to counter challenging market conditions and the slowdown in 5G deployments, especially in North America. Prior to that, Ericsson revealed plans to cut 8,500 jobs, mostly during the second half of 2023 but also into 2024.
More broadly, job losses across the tech sector so far this year have almost surpassed 100,000, according to Layoffs.fyi.
5G: It’s an odd number
There’s an old saying in wireless that the odd-numbered generations are failures and the even-numbered generations are successful, but this seems like the worst downturn since the 3G-to-4G transition, Recon Analytics analyst Daryl Schoolar said. That was around the time Nortel Networks collapsed and the original Motorola went out of business.
Part of the problem with 5G is the old chicken-and-egg conundrum, he said. The real benefit for operators is in the 5G standalone (SA) core versus non-standalone (NSA), which is where brownfield operators in the U.S. started.
With the exception of T-Mobile, U.S. operators haven’t invested in the SA core to a great extent, the reason being that there are no killer services to justify it.
“They can’t monetize the network until they have standalone, but they don’t want to invest in standalone until they can monetize it,” he said. “They have to get to standalone first before they’re ever going to change the narrative that they can’t monetize the network.”
And yes, to mix metaphors, it’s not so much of a telecom winter as it is a severe drought.
“We’re in an investment desert right now and I don’t see any oasis on the horizon for a while,” Schoolar concluded.