The wireless LAN market was hit by a choppy supply chain in the first quarter of 2022 and lockdowns in China are compounding the problem, according to analysis by Dell’Oro Group.
Many organizations have scheduled network upgrades, but supply can’t keep up with demand, and delays are reported to be 10 to 15 times greater than before the pandemic.
Several manufacturers have cited components from 2nd and 3rd tier vendors as the cause of the bottleneck, Dell’Oro said, meaning the problem may not be a shortage of Wi-Fi silicon, but secondary components that nonetheless are necessary to make a complete product.
“The second and third tier vendors make up a smaller portion of the overall system components. Which means that the wireless access point manufacturer may have the main parts, such as the wireless semiconductor, but there may be some small part missing, but without the one small part, the hotspot won’t work,” said Dell’Oro Founder and CEO Tam Dell’Oro Register.
Volatility in the supply chain is also an issue, Dell’Oro said, and the situation varies from supplier to supplier depending on whether they can source the specific parts they need. In November, Arista and Juniper quoted up to 80 weeks on certain components, although this was not specific to just wireless LAN.
Some vendors may see shipments of certain ranges rise 20 percent one quarter and fall 20 percent or more the next, meaning they’re “on a rollercoaster ride, a very difficult situation to navigate,” he said. Dell’Oro.
Dell’Oro obtains its data from various sources, such as that published by manufacturers when financial results are announced. Comparing this data with figures drawn from surveys on sales of Ethernet switches and wireless LAN equipment, Dell’Oro said it was able to deduce that wireless LAN has been more affected by the supply of components.
Citing a few specific examples, Dell’Oro said that Cisco stated during its May earnings call that it had 11,000 PCBs built waiting to be shipped, but they needed power supplies, which come from China, and were delayed due to Covid lockdowns.
Cisco CEO Chuck Robbins said at the time: “When we look at the fourth quarter [of our fiscal 2022] And think about the Shanghai lockdown and what we’ve heard, because in Shanghai there are a lot of components that go into our power supplies, we can’t get those components. Shanghai now says they will open on June 1.”
The lockdown in China’s largest city will affect Cisco’s sales of between $131 million and $720 million in revenue for its fourth quarter, which ends in August.
Meanwhile, HPE revealed that the order book for its Aruba business exceeded $4 billion, compared to average quarterly revenue of around $800 million to $900 million. Senior HPE staff said they don’t expect delays to peak until late 2022.
Backlogs increase from $30 million to $425 million
Another example is Extreme Networks, which saw its Product Backlog increase to $425 million, which compares with a delay in the region of $30 million to $35 million before the supply chain problems began. Executives said revenue in the second calendar quarter would likely be “a low water mark” in their overall earnings outlook, blaming lockdowns in China.
Dell’Oro also noted that Wi-Fi 6E sales accelerated during the first quarter as more manufacturers released products, but cautioned that adoption of the technology currently appears to be “below the rates of the previous two technologies, Wi-Fi 6 and Wi-Fi”. -Fi 5 Wave 2″.
The company had previously forecast that supply chain issues could cause organizations not to deploy the Wi-Fi 6E network kit and instead wait for the availability of the next generation of Wi-Fi 7 products, at which point which supply chain issues are expected to have been resolved.
This forecast was challenged by the Wi-Fi Alliance, the nonprofit organization that owns the Wi-Fi trademark and counts Wi-Fi providers among its members. ®