FY2021-FY2026 Mid-Term Demand Forecast for Telecommunication Equipment ― Increased even during COVID-19

The Communications and Information Network Association of Japan (CIAJ) published "FY2021-FY2026 Mid-Term Demand Forecast for Telecommunication Equipment" on December 16. In both FY2020 and FY2021, the Japanese economy was sluggish because of the effects of the protracted and uncertain COVID-19 pandemic. However, in the telecommunications equipment market, telework as a measure against COVID-19, the enhancement of communication infrastructure equipment resulting from increased traffic associated with home-based learning, and increased demand for mobile communication terminals attributable to take-up measures in anticipation of the 3G (2nd generation) stoppage and replacement with 5G (5th generation) terminals, among others, were positive factors. The total FY2020 demand increased by 2.9% from the previous year. In addition, total demand is forecasted to increase by 4.0% in FY2021. Furthermore, the mid-term outlook predicts that the total FY2026 demand will increase by 22.3% relative to FY2020, and this growth trend is expected to continue. The total FY2020 demand was 3,301.1 billion yen (up 2.9% from the previous year).

In the Japanese economy in FY2021, as economic activities were being resumed after infection control measures such as vaccinations, the telecommunications equipment market faced risks, such as supply chain stagnation and supply constraints because of semiconductor shortages. However, the total demand is forecasted to be 3,432 billion yen (up 4.0% from the previous year) because of the increase in traffic from the promotion of digital transformation (DX) and the full-scale development of 5G base stations. A further look at FY2022 and beyond shows that information and communication technology (ICT) will take advantage of the measures adopted against COVID-19. Even in the event of a new infectious disease or disaster, there will be a need to respond to diverse social requirements, such as completing daily tasks , commuting to work/school, and corporate production/sales activities.

To this end, new information and communication terminal sales and service businesses that use 5G, Beyond 5G/6G, and artificial intelligence (AI) technologies will increase, and the growth of communication infrastructure and networks will be strengthened, including optical transmissions, to manage the increasing traffic from an increase in the data handled by information and communication terminals. These developments and improvements will support the promotion of the digitalization of society as a whole for further economic growth and productivity improvements. As a result, according to this mid-term demand forecast, the telecommunications equipment market will continue to expand till 2026, and the FY2026 total demand for the telecommunications equipment market is predicted to be 4,036.2 billion yen (up 22.3% from FY2020). The following is an overview of the demand forecasts for FY2021 and the mid-term.

Forecast for FY2021

The total FY2021 demand is expected to be 3,432 billion yen (up 4.0% from the previous year), of which domestic demand is predicted to be 3,109.6 billion yen (up 2.6%), and exports are predicted to be 322.4 billion yen (up 19.7%). In FY2020, the key equipment that are expected to increase relative to FY2019 are as follows: base station communication equipment, 296 billion yen (up 31.1% from the previous year); mobile communication terminal (with a public line), 1,902.6 billion yen (up 2.8% year-on-year); fixed-line communication equipment, 160.1 billion yen (up 22.9% year-on-year); routers, 113.7 billion yen (up 3.0% year-on-year); and station switchboards, 200 million yen (up 589.7% year-on-year).

Mid-term outlook

The total FY2026 demand for communication equipment was 4,036.2 billion yen (up 22.3% from FY2020). The breakdown is as follows: Domestic demand is forecasted to be 3,696.1 billion yen (up 21.9% year-on-year), and the export value is forecasted to be 340 billion yen (up 26.3% year-on-year). Demand for major components , which is expected to grow relative to FY2020, is as follows. Mobile communication terminals (with public lines) were 2,383.9 billion yen (up 28.8% from FY2020); base station communication equipment, 458.3 billion yen (up 103.0% from FY2020); fixed communication equipment, 165.7 billion yen (up 27.2% from FY2020); LAN switches, 202.4 billion yen (up 6.1% from FY2020); digital transmission equipment, 174.3 billion yen (up 5.4% from FY2020); routers, 115.8 billion yen (up 5.0% from FY2020); optical access equipment, 23.7 billion yen (up 1.4% from FY2020); and station switchboards, 200 million yen (up 589.7% from FY2020).

By contrast, the mid-term demand forecast also includes the global mobile phone market, such as smartphones. According to the report, global recovery from the COVID-19 pandemic is expected in 2021. Although concerns exist over supply restrictions because of semiconductor shortages from the latter half of FY2021, supply capacity is expected to increase in 2022. Therefore, demand is predicted to continue to increase until 2025 as replacement demand for 5G terminals rises mainly in developed countries and the shift from feature phones to smartphones occurs in emerging countries. The number of 5G terminals globally is expected to grow to 16 billion in 2025. However, growth is expected to be moderate after 2022 as a result of the maturation of emerging markets and the lowering of 5G terminal prices. Moreover, global sales in 2025 are projected to be US$ 435.6 billion, and compound annual growth rate (CAGR) is forecasted to increase to 4.5%.