Image source: Advantest
The White House has recently unveiled a plan to stifle the dominance of Huawei’s 5G telecommunication networks. Outlined in The Wall Street Journal, the Trump administration plans to develop a common engineering standard for 5G software designers with infrastructure supplied solely by U.S. companies. White House economic adviser Larry Kudlow confirmed the plan to the paper.
Using open-source software to fight Huawei
One fascinating aspect of the plan is the shift toward using open source software rather than dedicated hardware products. Essentially, the plan would virtualize through cloud technology different functions in the network. Microsoft, AT&T, Dell and Oracle all confirmed its involvement with the plan. “We are involved in the White House effort and we think U.S.-based technology companies have a lot to contribute to the 5G build-out,” Ken Glueck, Executive Vice President of Oracle, confirmed to Axios.
Two purposes drive this open source shift: to reduce the costs of rolling out 5G and to block Huawei, the top seller of telecom equipment.
Slowing down a giant
According to most analysts and The Wall Street Journal article, Huawei has a “formidable” head start thanks to subsidies by Beijing. The White House is looking to accelerate its network by bringing together the country’s largest technology companies and making them work hand-in-hand on a “soup-to-nuts” solution that would eliminate Huawei.
The Wall Street Journal added that U.S. officials are trying to partner with European nations to work as one mindshare. The U.K.’s decision to partner with Huawei on 5G infrastructure—the Chinese telecom company will build out 35 percent of the non-core network in the U.K.—was a blow to the White House’s plan on the international front.
Huawei is now the dragon in the room when it comes to any 5G discussion. The Chinese government has invested roughly $24 billion in 5G infrastructure, according to Deloitte. With the future of connectivity on the line, the White House added Huawei on its Entity List, stating the company is an arm of the Chinese government and poses an electronic espionage risk. The ban on Huawei equipment in the U.S. will take effect on Sunday, February 16th, 2020, after Secretary of Commerce Wilbur Ross gave a 90-day delay. He granted the delay to enable rural carriers extra time to replace its Huawei products.
Therefore, in addition to a concerted campaign against Huawei, the White House is looking to accelerate the time to market for 5G services through an open-source, cloud-based solution.
Who benefits?
Among the beneficiaries of this accelerated rollout will be 5G component test system manufacturers. Test and validation providers are an essential aspect of the 5G race as they enable the advanced networking capabilities—like beamforming, phased arrays and massive multiple-inputs/multiple-outputs—to be analyzed in real-time. A report by Fior Markets estimated that automated test equipment would grow to $5.97 billion by 2025 at a CAGR of 5.42% during the forecast period of 2018-2025.
Looking at Advantest Corp’s SoC Products
Japan’s Advantest Corporation is a company that offers system-on-a-chip (SoC) tests for 5G mobile carriers. Advantest’s SoC system enables designers to test speed, fault coverage, diagnostic options and test length for testing any random logic block.
Image source: Advantest Corp. Q3 FY 2019 Financial Briefing Presentation
In the Q3 2019 earnings conference call, the company’s leadership separately acknowledged the demand for their SoC testers for 5G products, and they even seemed slightly surprised by the heightened demand.
As with orders, the third quarter saw a high number of customers moving toward mass production of SoC products in preparation for full-scale sales of 5G smartphones.
-Yasuo Mihashi, Corporate Relations Officer
As for the calendar year 2019, demand for testers for the development and production of high-end SoCs, mainly for 5G, grew more so than we had expected.
-Yoshiaki Yoshida, President and CEO
Later in the same call, Mr. Yoshida stated that the 5G rollout added an “additional” $500-$600 million to the total SoC market in the 2019 calendar year. The company’s semiconductor and component test system segment was up 10.1% quarter-over-quarter. Advantest’s SoC testers accounted for ¥31.5 billion ($286,996,500) in the same quarter.
Trading on the Tokyo Stock Exchange, the company’s share price has increased more than 128% in the past year.
Image source: Big Charts
With the race for 5G heating up and a shift in U.S. strategy occurring, Advantest Corp. is a company to watch in 2020 as its top-tier testers will be necessary to validate the strength and speed of new infrastructure.
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Equities Contributor: Stephen L. Kanaval
Source: Equities News
