Global Market Size for 5G Network Function Virtualization (2024 - 2030)

The worldwide market for 5G Network Function Virtualization (NFV) reached a value of USD 28.41 Billion and is forecasted to achieve USD 154.76 Billion by the conclusion of 2030. Throughout the period from 2024 to 2030, the market is expected to expand at a Compound Annual Growth Rate (CAGR) of 27.4%.

AN OVERVIEW OF 5G NETWORK FUNCTION

The concept of 5G Network Function Virtualization (NFV) pertains to the design, execution, and administration of networking services. NFV enables the execution of software on virtual machines while simultaneously performing a range of networking functions on a hardware basis. Contemporary NFV systems can be installed on various hardware platforms beyond the traditional routers and firewalling devices. It is often integrated with several other services such as firewalls, caching, Network Address Translation (NAT), and Domain Name Service (DNS). The architecture of 5G NFV comprises an element manager, virtualized infrastructure manager, orchestrator, and operation support system.

One of the key factors fostering a positive outlook for the industry is the substantial expansion in sectors including Banking, Financial Services and Insurance (BFSI), Healthcare, Retail, Manufacturing, and Information Technology (IT). The escalating network traffic and complexity of data management have elevated the demand for sophisticated network management and NFV solutions. The industry is further propelled by the increased adoption of virtual appliances that conduct various networking functions such as traffic forwarding, monitoring, security, caching, intrusion detection systems, and domain name service. NFV serves as another growth-driving component, offering optimal network scalability and agility to govern the entire network and enhance its overall performance. It can also be linked with private cloud computing and the Internet of Things (IoT) for enhanced flexibility. Additional factors expected to fuel market growth include the rising demand for server virtualization, data centre consolidation, and increased investments in 5G network technologies.

IMPACT OF COVID-19 ON THE 5G NETWORK FUNCTION VIRTUALIZATION MARKET

Numerous countries have experienced significant impacts due to the COVID-19 pandemic. Sectors such as IT and Telecommunications have been notably affected by measures such as lockdowns, social distancing, and quarantines aimed at curbing the spread of COVID-19. Corporate Virtual Private Network (VPN) servers have become crucial for businesses and educational institutions, with a portion of employees working remotely and students attending online classes. UNESCO reports that currently, 850 million students are learning and attending classes from their homes. The sudden shift to remote work for millions of individuals has had a profound impact on their usage of communication networks. With most of Europe under lockdown, network traffic has surged by approximately 50%. In early 2020, China, a major producer and consumer of end products such as smartphones, PCs, and tablets, witnessed the initial impacts of COVID-19 on the NFV industry. Manufacturing facilities in China were closed for several months, leading to disruptions in the supply chain, limitations on importing and exporting end devices to and from restricted regions in China, as well as affecting the production, sales, and operations of the sector. A global organization working on 5G technology, known as 3GPP, announced in March 2020 that the COVID-19 pandemic would delay the decision on 5G standards by three months. The commercial development of NFV devices and the deployment of 5G were consequently slowed down due to delayed releases. Supply chain disruptions and delays in the introduction of 5G specifications are anticipated to impact the global market and revenues for network functions virtualization in 2020 and 2021. Nevertheless, numerous businesses are actively working towards revitalizing the NFV sector. Local governments have also implemented various measures to mitigate the adverse impacts of COVID-19. Consequently, the NFV industry is expected to gradually regain its momentum after 2022.

MARKET DRIVERS:

Enhanced cost efficiency and increased agility are driving market growth

Carriers are faced with the challenge of providing higher bandwidth at a reduced cost. However, high bandwidth requirements or on-demand services were not originally part of conventional carrier networks. Moreover, attempting to enhance existing hardware-based networks is costly, challenging, and often ineffective. As a result, carrier revenues are now growing at a slower pace than networking expenses, which is not a sustainable long-term business model. Solutions for 5G network services virtualization aim to assist carriers in transitioning away from proprietary network hardware, significantly reducing costs and enhancing service agility. This is achieved by separating network software from hardware.

Increased efforts and initiatives by market players are further propelling market growth

The benefits and concepts of NFV are straightforward, yet their practical implementation poses challenges. To fully leverage the advantages of NFV, a certain level of collaboration and engagement between diverse network solution providers and network operators is necessary. Industry organizations play a crucial role in facilitating this collaboration. Leading network operators across the globe are swiftly establishing an Industry Specification Group (ISG) for NFV. The efforts of these organizations to define the NFV framework have garnered considerable attention, though they represent just one facet of this rapidly evolving business landscape.

MARKET RESTRAINTS:

Concerns over scalability and security risks could impede market growth

One prevalent concern regarding virtualization is the potential impact on employment should assets become unavailable. A prolonged unavailability of a company's data could severely hinder its competitiveness within the industry. Additionally, virtualization does not afford users direct control over their connectivity's ability to remain sustained, as availability is managed by external providers. While virtualization enables swift business or prospect expansion, users might find the process not as rapid as anticipated. The growth can lead to sluggishness in a virtualized network, as multiple entities are utilizing the same resources.

5G Network Function Virtualization Market– BY COMPONENT

• Categories
• Organizations

The 5G network function virtualization market is categorized into two segments: Categories and Organizations. The Categories segment, which held a substantial revenue share of 74.1% in 2021, is expected to maintain its dominance throughout the forecast period. This growth can be attributed to the increasing utilization of automation and virtualization technologies. Anticipated growth factors include the rising demand for mobility services and businesses' emphasis on reducing operational costs through 5G NFV. The Categories segment comprises orchestration and automation, along with components such as virtual infrastructure managers, SDN controllers, NFV orchestrators, and WAN settings. Orchestration's primary objective is to automate and enhance the production of network services through the use of virtualized network capabilities (VNF), scalability, self-healing, and resource lifecycle management. It is not mandatory to employ a cross-domain network orchestra for VNF connection with the service orchestrator. Orchestration and automation are widely adopted due to their simplicity and significance, particularly in scenarios without vendor lock-in, where customized and promoted solutions are preferred.

5G Network Function Virtualization Market- BY ORGANISATION SIZE

• Enterprise Sizes
• Large Enterprises
• Small & Medium Enterprises

The 5G network function virtualization market is divided into Enterprise Sizes: Large Enterprises and Small & Medium Enterprises. Large enterprises led the market with over 50% of the total revenue share in 2021 and are projected to witness rapid growth in the forecast period. This segment is expected to expand as large businesses increasingly adopt network operations, virtualization tools, and services. Major organizations are driving the need for network functions, virtualization solutions, and services by being early adopters of advanced technologies such as virtualization, orchestration, and automation. A robust network infrastructure is essential for large businesses to manage their resources and enhance productivity. Therefore, NFV aids in reducing device costs and power consumption by consolidating devices and leveraging the economies of scale inherent in large enterprises.

5G Network Function Virtualization Market- BY APPLICATION

• Functional Areas
• Virtual Appliance
• Core Network

The 5G network function virtualization market's Application segment includes Virtual Appliance and Core Network. The Virtual Appliance segment led with 56.9% of the total revenue share in 2021 and is expected to experience rapid growth in the coming years. Virtual appliances are commonly used for various network functions such as domain name services, traffic forwarding, security, monitoring, and caching. The Virtual Customer Home Appliance is predominantly utilized to extend these processes to the edge. This has simplified network configurations for businesses, driving significant market growth.

The Core Network category in the global market is projected to grow at a CAGR of 24.9% from 2024 to 2030. This growth is fueled by the complexities of modern networks and the increasing demand for network virtualization and automation. Typical functions of the core network include traffic forwarding, security monitoring, domain name services, and intrusion detection systems. The creation of a virtually enabled packet core, which extends these processes to the edge, has greatly reduced network complexities for organizations. Some NFV solution vendors are actively investing in 5G NFV for core networks, capitalizing on the advantages of this sector to enhance accessibility for SMEs. This is expected to fuel robust growth in this segment during the forecast period.

5G Network Function Virtualization Market- BY END-USER

• Industry Segments
• Service Providers
• Data Centers
• Enterprises
• Banking, Financial Services, and Insurance (BFSI)
• Healthcare
• Retail
• Manufacturing
• Government and Defense
• Education
• IT-enabled Services
• Others

The End-User segment of the 5G network function virtualization market is categorized into Service Providers, Data Centers, and Enterprises. The Service Providers category held the largest revenue share in 2021, contributing over 40% to the total revenue. This segment is expected to witness significant growth during the forecast period. Growing data volumes, diverse data types, increasing connections for IoT/M2M devices, and higher smartphone penetration leading to increased data consumption per user are straining the network infrastructure of service providers. Consequently, service providers can easily scale up their capacity to meet rising demands. However, modern network designs typically rely on costly hardware-based devices with tightly integrated software, leading to less scalability, higher costs, and increased complexity. NFV transforms network architecture to provide real-time network visibility to applications. This allows applications to program the network according to their requirements, fostering the development of a flexible infrastructure.

The enterprise segment is expected to grow at a CAGR of 24.9% in the global network functions virtualization market during the forecast period of 2022–2030. Enterprises are inclined to adopt NFV due to its substantial benefits, including centralized administration for network efficiency, IT agility, and rapid, reliable application services for network adaptation.

5G Network Function Virtualization Market- BY REGION

• North America
• Europe
• The Asia Pacific
• Latin America
• The Middle East
• Africa

The 5G network function virtualization market is geographically segmented into North America, Europe, Asia Pacific, Latin America, the Middle East, and Africa. North America held the highest revenue share of 31.2% in 2021, driven by the adoption of technologies such as Software Defined Everything (SDx), cloud computing, and IoT. The rapid growth of various sectors is facilitated by the high level of industrialization in countries like the United States and Canada. The 5G NFV sector is thriving due to favorable regulations and laws in North American countries. Several companies in North America offer 5G NFV infrastructure, including Juniper Networks, Cisco, IBM Corporation, and Extreme Networks. This presents new opportunities for NFV infrastructure adoption and is considered a lucrative investment sector. With 5G NFV, the controller assumes responsibility for the entire network, necessitating organizational, functional, and cultural adjustments for deployment.

The Asia Pacific region is expected to experience rapid growth during the forecast period. The adoption of technologies such as Software Defined Everything (SDx), cloud computing, and the Internet of Things is the primary driver of this growth. Additionally, countries like China, India, and Japan contribute to the expansion of the subscriber base, favorable governmental regulations, and the need for increased data storage and security, all of which are expected to propel the market's progress.

5G Network Function Virtualization Market- BY COMPANIES

Key Players

1. Cisco systems, inc.
2. Ericsson
3. Huawei technologies co., ltd.
4. Vmware, inc.
5. Nokia corporation,
6. Hewlett packard enterprise company
7. Dell emc
8. Juniper networks, inc.
9. Zte corporation
10. Fujitsu limited
11. Comba telecom systems
12. Affirmed networks
13. Netscout systems, inc.
14. Wind river systems, inc.
15. Eci telecom
16. Mavenir
17. Ciena corporation

NOTABLE DEVELOPMENTS IN THE 5G Network Function Virtualization Market

• ACQUISITION: In April 2022, Intel acquired assets from Granulate Cloud Solutions, a well-known provider of expert services for cloud-based CRM software. This acquisition aimed to expand Intel's portfolio and assist clients in reducing CPU usage and application latencies.
• COLLABORATION: In July 2021, Intel partnered with the Indian telecom company Bharti Airtel to accelerate the advancement of radio access network technology, 5G, and 4G virtualized radio access networks.
• PRODUCT LAUNCH: In June 2021, Hewlett Packard introduced a new 5G software solution to its existing 5G portfolio. This solution includes the ability to coordinate network operations, infrastructure operations, and service operations. Additionally, the new 5G software solution automatically identifies and resolves issues to ensure service continuity.

ACQUISITION: In February 2020, Hewlett Packard completed the acquisition of Scytale, a leader in InfoSec compliance automation. This merger of expertise aimed to accelerate Hewlett Packard's progress toward achieving its objectives.