COMMUNICATIONS AND INFORMATION
NETWORK ASSOCIATION OF JAPAN

The Communications and Information network Association of Japan (CIAJ), a general incorporated association, released its “Mid-Term Demand Forecast for Telecommunication Equipment,” covering FY2013 through FY2018 as follows.
The Forecast projects the telecommunication equipment market through FY2018 based on statistical data of orders received/shipped and information gained through interviews via a third party. Furthermore, global trends and other information from Gartner Inc., was also used to substantiate our forecast.

1. Outline

The Japanese economy in FY2013 saw a recovery of exports with the weaker yen and a gradual recovery of domestic demand, helped by such factors as economic policies to increase public spending. In the domestic telecommunication equipment market, fierce competition continues with the popularity of global brands, but the market itself is growing, as large capacity high speed telecommunication networks and diverse mobile terminals are widely embraced.

FY2012 saw a rise in investment by telecommunication carriers, with demand growth in base stations, digital transmission equipment and optical access equipment. While demand for fixed communication equipment and central switching systems rose, there was a decrease in mobile terminals (for public carrier network use), which includes smartphones and feature phones, office-use terminals, such as multi-functioning facsimiles, and consumer equipment, such as cordless phones. Such factors contributed to the total telecommunication equipment market figure for FY2012 of approximately 3.591 trillion yen, or a year-over-year positive growth of 1.8%.

Expected growth categories in FY2013 are base stations and digital transmission equipment from capital investments, as well as fixed communication equipment. However, demand is expected to be weaker for mobile terminals (for public carrier network use), office-use and personal facsimiles and multi-functioning facsimiles. In sum, the total telecommunication equipment market figure for FY2013 is forecast at approximately 3.596 trillion yen, or a positive year-over-year growth of 0.1%.

From FY2014 onwards, government statistics point to a shrinking domestic population that will be increasingly older, meaning fewer people in their productive years. The domestic communication infrastructure is already 100% broadband with FTTH coverage exceeding 90%.

Domestic demand for telecommunication equipment will peak in FY2013 and is forecast to decrease in FY2014 and FY2015, with a gradual recovery from widespread use of mobile terminals from FY2017 onwards. From these assumptions, the total market value in FY2018 is forecast at approximately 3.563 trillion yen, or a decrease of 0.8% over the FY2012 figure.
In the mid- to long-term forecast, new demand for equipment and services are expected as diverse mobile terminals (for public carrier network use) become more popular in association with the 2020 Tokyo Olympics and a new ICT infrastructure supported society is realized.

2. Forecast Figures (Chapters 1-3)

[1] FY2013 Forecast

The FY2013 telecommunication equipment market is expected to be 3.596 trillion yen (0.1% year-over-year growth), with the domestic market accounting for 3.205 trillion yen (-0.5% year-over-year growth), and exports accounting for 390.5 billion yen (5.5% year-over-year growth).

(1) Consumer equipment: 1.810 trillion yen (-1.1% year-over-year growth)

Demand for mobile terminals (for public carrier network use), which makes up approximately 90% of the consumer equipment category, is expected to decline, with smartphone growth not able to make up for the loss in feature phone demand. Cordless telephones, personal facsimiles and multi-functioning personal facsimiles are forecast to decline with the shrinking number of users among households. Exports in this category will decline as manufacturing shifts overseas.

(2) Enterprise equipment: 555.7 billion yen (-0.4% year-over-year growth)

Steady domestic demand is expected to continue for key telephone systems, PBXs and office-use cordless phones, with renewals and upgrades. The demand for office-use facsimiles is forecast to decline as users migrate to multi-functioning office-use facsimiles. Overall exports are expected to increase with robust growth abroad for multi-functioning office-use facsimiles.

(3) Infrastructure equipment: 807.3 billion yen (5.0% year-over-year growth)

Capital investments by domestic telecommunication carriers to keep up with the boost in mobile data traffic will lead to growth in base stations and digital transmission equipment. There will also be growth for fixed communication equipment with heightened recognition of disaster prevention measures. Central office equipment is expected to decline. Exports are expected to record significant growth with demand from emerging markets and the economic recovery of Europe and North America.

(4) Internet equipment, telecommunication equipment parts: 428.4 billion yen (-0.3% year-over-year growth)

Although demand in routers and LAN switches is expected due to the explosive rise in mobile traffic, the decrease in investments in next-generation networks will likely result in flat or negative growth. Optical access equipment and telecommunication equipment parts (including relay equipment) figures will also decline with the near completion of FTTH investments. LAN switches are expected to gain global competitiveness and push export figures to positive growth.

[2] Midterm Projection

The FY2018 figure is projected at 3.563 trillion yen (-0.8% growth over FY2012), with the domestic market accounting for 3.186 trillion yen (-1.1% growth over FY2012) and exports accounting for 377.7 billion yen (2.1% growth over FY2012).
The following is a synopsis of main conclusions.

In looking at the telecommunications equipment market through FY2018, the race for survival with global brands will become even fiercer, as markets become increasingly borderless. At the same time, the switch to high-speed IP and mobile networks will stimulate demand for sensor network-compatible mobile communication devices and cloud services for big data.
The telecommunication equipment market from 2013 through 2018 will peak in 2013, followed by gradual decline, making a slow recovery from 2017.

The projections, by category, for FY2018 are as follows:

(1) Consumer equipment (5.4% over FY2012)

In mobile terminals (for public carrier network use: includes smartphones and feature phones), the shift to smartphones will continue, with the domestic shipment of smartphones accounting for 81.9% in 2018. The number of mobile terminals (for public carrier network use) shipped for the domestic market will fall in FY2013, but rebound thereafter as popularity of data communication devices grows.
The ratio of domestic smartphone brands (in number of devices) is forecast to recover to about 47% in FY2018.
Efforts will be made to equip cordless telephones, personal facsimiles and multi-functioning personal facsimiles with more advanced features to boost demand, but the popularity of mobile phones and e-mail will result in less use and diminishing demand from households.

(2) Business equipment (-9.2% over FY2012)

Despite yearly upgrade and replacement demand for key telephone systems, PBX and office-use cordless phones, they are forecast to remain flat or decrease from FY2014 onwards.
The rapid switch to multi-functioning facsimiles will continue for office-use facsimiles and overall demand is projected to decrease with the shrinking number of offices and the consolidation of IP devices.

(3) Infrastructure equipment (-8.6% over FY2012)

The exponential growth in data traffic from smart phones and video streaming services is expected to push demand higher for digital transmission equipment, fixed communications equipment and base stations.
Robust demand growth for digital transmission equipment associated with mobile network infrastructure is projected from public as well as private sectors. With healthy demand among emerging markets, exports are forecast to grow as well.
With the switch from PSTN to IP networks and falling year-over-year investment by telecommunication carriers, we expect a dramatic drop in demand for central office switching systems. Domestic demand for infrastructure equipment is forecast to fall, while need for laying down social infrastructure in emerging countries will continue to push exports higher, leading to overall category growth.

(4) Internet equipment/ telecommunication equipment parts (-2.2% over FY2012)

Investment by telecommunication carriers to accommodate the surge in data traffic and growing demand for data centers from the popularity of cloud services are expected to push this category into positive growth. However, the consolidation of devices and fierce price competition will pull down prices, and the overall figure will remain basically flat.

3. Study of Global Markets: Use of data provided by Gartner Inc. (Chapter 4)

Although the overall domestic market for telecommunication equipment is expected to undergo a slow decline, global markets, led by emerging markets in Asia, is forecast to push demand significantly higher.

With such a backdrop, a new chapter was created 2 years ago (separate from Chapters 1 – 3 dedicated to the domestic market), based on global market data purchased from Gartner Inc. as well as insights of expert analysts.

• Figures: 2012 actual sales figures in value and number of devices and market forecast for 2013 through 2017 (calendar year) as of the second quarter of 2013.
  *Note there are differences from CIAJ data in equipment type definitions and sales figures, in addition to the difference in use of calendar year versus Japanese fiscal year.
• Scope: (following 8 categories)
  “Mobile device (smart phone, feature phone),” “Open OS mobile device,” “Copier and MFP (personal, enterprise),” “Broadband access,” “Optical transport,” “Base station equipment,” “Enterprise router and switch,” “Mobile carrier router and switch”
• Summary of global market forecast and major equipment trends:
  According to the 2013 “White Paper on Information and Communications in Japan (Ministry of Internal Affairs and Communications),” the global telecommunication equipment market will grow an average 4.8% per annum from telecommunication demand growth, despite commoditization.
  In the 8 categories mentioned above, mobile device and open OS mobile device will grow by 7.4%, led by Asia. Mobile base station equipment, broadband access, and routers and switches are also forecast to show robust growth.

By communication protocol, 3G (W-CDMA, TD-SCDMA, HSDPA, HSUPA) will show positive growth until 2016, followed by flat growth thereafter.
LTE will grow rapidly after 2013, becoming 8 times the 2012 figure in 2017, at which point LTE devices will become widespread throughout the world.
Service provider edge routers and LAN switches will be 1.6 fold the 2012 figure in 2017.

Both the fixed and mobile categories are projected to show negative growth in Japan’s telecommunication equipment market, while the global market is expected to perform at 4 to 5% annual growth, led by Asia/Pacific markets.
Telecommunication carriers and backbone networks will need to rapidly accommodate surging data traffic in order to provide reliable operation of society’s infrastructure. Global vendors will not only be expected to deliver products, but propose a combination of operation and services.

Please contact Mr. Miya (e-mail: s_miya[at]ciaj.or.jp) to purchase a copy of the CIAJ FY2013 Mid-Term Demand Forecast for Telecommunication Equipment (6,000 yen + tax for CIAJ members, 19,000 yen + tax for non-CIAJ members). The CIAJ FY2013 Mid-Term Demand Forecast for Telecommunication Equipment is available only in Japanese.

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Market Research
CIAJ
tel: 81-3-5403-9356 fax: 81-3-5403-9360

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CIAJ
tel: 81-3-5403-9351 fax: 81-3-5403-9360