In order to weed out the uncertainty regarding the availability of chips for 5G equipment amid the coronavirus-induced turmoil, Nokia Corporation NOK recently strengthened its supply chain by adding Broadcom Inc. AVGO as one of its vendors. Markedly, Broadcom becomes the third 5G vendor for Nokia after Marvell Technology Group Ltd. MRVL and Intel Corporation INTC.
Nokia had earlier decided to develop 5G equipment based on Field Programmable Gate Arrays that are easily programmable. However, high costs associated with it and a dearth of suppliers effectively forced the company to look out for cheaper alternatives. Nokia is currently aiming to develop low-cost 5G equipment with a new breed of suppliers to thwart competition from other low-cost manufacturers like Huawei.
The addition of more suppliers is likely to lead to a steady flow of raw materials for Nokia and diversify its supply chain. This, in turn, is expected to improve its gross margin as it increases shipments of 5G products with custom-made chips. The company intends to have the custom chips in more than 35% of its 5G shipments by the end of this year, significantly increasing it to 100% by the end of 2022.
Notably, Nokia achieved a significant milestone in the development of 5G technology in the United States, last month, with record 5G speed of up to 4.7 Gbps in its Over-the-Air network, backed by 800 MHz of millimeter-Wave spectrum and dual connectivity. This underscored Nokia’s commitment to aid businesses and customers with superior network capacity as majority of communication service providers are migrating to experience-driven and automated 5G network operations.
Backed by enhanced network capacity and ultra-low latency, Nokia leveraged EN-DC functionality or dual connectivity to enable operators to transmit data simultaneously across 5G and 4G networks with higher transmission rates. Markedly, the company is focusing on the dual connectivity feature on its Air-Scale platform as a way for operators to maximize their spectrum assets. Touted as the industry’s first-of-its-kind, commercial, end-to-end 5G solution, the avant-garde technology enables operators to capitalize on 5G-backed opportunities to boost profitability as well as maximize the value of licensed and unlicensed spectrum with minimum future capital expenditures.
Nokia remains focused on building a robust scalable software business and expanding it to structurally attractive enterprise adjacencies. It has reached more than 66 commercial 5G contracts across the globe, with 19 live networks. The company’s end-to-end portfolio includes products and services for every part of a network, which are helping operators enable key 5G capabilities, such as network slicing, distributed cloud and industrial IoT. Nokia facilitates customers to move from an economy-of-scale network operating model to demand-driven operations by offering easy programmability and automation. Accelerated strategy execution, sharpened customer focus and reduced long-term costs are expected to position the company as a global leader in the delivery of end-to-end 5G solutions.
Nokia’s shares have lost 13.4% against the industry’s growth of 2.1% in the past year.
Nevertheless, we remain impressed with the inherent long-term growth potential of this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Click to get this free report Nokia Corporation (NOK) : Free Stock Analysis Report Intel Corporation (INTC) : Free Stock Analysis Report Marvell Technology Group Ltd. (MRVL) : Free Stock Analysis Report Broadcom Inc. (AVGO) : Free Stock Analysis Report To read this article on Zacks.com click here.