Written by Jeff Heynen
“Inventory Correction,”“Inventory Realignment,” Or whatever term you prefer to call the root cause of 2023’s broadband spending slowdown will likely persist well into 2024. Without the benefit of fourth quarter numbers, total spending on broadband equipment in 2023 is expected to show a decline of around 10%. Early projections for 2024 indicate an additional 5% year-over-year decrease, as the lagging impact of interest rate increases to curb inflation will be felt more acutely. This additional 5% decrease would put total spending to around $16.5 B—roughly equal to 2021 spending levels.
The expected declines in 2023 and 2024 follow three straight years of white-hot growth in broadband network and service investments from 2020 to 2022. During this period, year-over-year growth rates reached 9%, 15%, and 17%, respectively. Similar periods of growth from 2003-2006 and 2010-2014 were both followed by two subsequent years of reduced spending, as operators—particularly in China—shifted their capital expenditure focus from broadband to mobile RAN.
The silver lining here is that very early signals regarding 2025 show a return to growth, as BEAD and other subsidization efforts begin to trickle down to broadband equipment suppliers. Well before that, pockets of growth in fixed wireless CPE, cable DAA equipment and CPE, and continued spending on PON equipment by tier 2 and tier 3 operators should make the broadband market one in which the headlines might communicate malaise, but a peek under the hood shows clear signs of resilience powering an inevitable return to growth.
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