"Open RAN Accelerates Reorganization of Telecom Equipment Suppliers... Domestic Firms to Benefit" [Click eStock]

Hana Securities: "Number of Market Players Declining Due to M&A"

On August 13, Hana Securities issued an "Overweight" investment recommendation for domestic telecommunications equipment component makers. As mergers and acquisitions (M&A) among global major telecommunications equipment suppliers (System Integrators, or SIs) have accelerated, sharply reducing the number of players in the market, the report forecasts that the local vendors will benefit from the dismantling of monopolistic structures when the deployment of next-generation technologies such as open RAN (Open Radio Access Network) becomes widespread.

Kim Hongsik, a researcher at Hana Securities, explained, "The number of global telecommunications equipment suppliers has continuously declined through 3G, LTE, and 5G eras." He attributed this trend both to the industry's pronounced seasonal fluctuations and to intensified competition resulting from aggressive low-cost strategies employed by Chinese state-owned equipment companies backed by government subsidies. As a result, the market has been reorganized around dominant players with substantial capital resources. For example, Alcatel and Lucent merged to form Alcatel-Lucent, which was subsequently acquired by Nokia.

The report projects that the adoption of open RAN will further accelerate this market reorganization. Until now, the core base station software and hardware components for telecommunications equipment differed in specification from manufacturer to manufacturer, creating compatibility barriers. The introduction of open RAN enables multiple companies to supply standardized hardware, thus dismantling the structures monopolized by large suppliers. Kim emphasized, however, that unlike previous rounds of market consolidation, market share is more likely to be distributed among several players rather than concentrated further among top-tier suppliers.

Paradoxically, Kim sees this as a significant opportunity for domestic small- and mid-sized component suppliers. Previously, the unique specifications of each major supplier led to fragmentation among component makers. With open RAN-driven standardization, a single component manufacturer could supply several major vendors simultaneously, allowing for broader business opportunities.

Kim stated, "In reality, companies with a record of global supply are largely limited to domestic firms. Given the spread of open RAN, Samsung Electronics and Fujitsu—which belong to the group of large suppliers affected by the disruption—are highly likely to benefit directly, and key partners such as KMW, Solid, and HFR are expected to see their global market share expand." He also viewed the reduction in dependence and business risk associated with specific large-scale vendors, resulting from open RAN standardization, as a positive development.

With U.S. telecom operators already introducing open RAN standards from 5G Stand Alone (SA) mode and in 6G networks, performance improvements for domestic wireless communication equipment stocks are expected to accelerate as the new generation of telecom technology becomes commercially available. Kim concluded, "A long-term investment strategy focused on leading wireless equipment suppliers such as KMW, Solid, HFR, and RFHIC remains valid."

Hana Securities' key recommended stocks (based on closing prices as of August 11) include: Solid (target price: 30,000 won), RFHIC (150,000 won), LIG Nex1 AQV (80,000 won), KMW (70,000 won), and Sena Technology (80,000 won).

This content was produced with the assistance of AI translation services.