viders. A few system vendors like Ericsson are also solution providers, but there are many companies that do only this busi- ness. These companies work, in general, in a specific geographical area and with a few Telecommunication Networks Value flux 52% of 15% of 80% of 33% of module value equipment value solution value oper. CAPEX Components Modules Systems Solutions Power feed equipments (working and back-up) Other CAPEX Central office conditioning system (if own) (non-equipment) Network control software FIGURE 2.10 Value chain of the telecommunication market from physical components (e.g., integrated circuits) to deployed networks. The CAPEX flux is indicated from higher to lower segments and examples are done of carriers' CAPEX spent out of this value chain. specific customers, due to the great impact both of logistic issues and of specific customer needs on their operations. We have seen in Figure 2.4 that telecom carriers have a huge CAPEX investment every year, of the order of several trillion U.S. dollars. It is quite interesting to analyze how this great cash flow distributes along the value chain. In Figure 2.11, the average destination of the U.S. and European carrier CAPEX is shown, using 2008 data, while the distribution of CAPEX along the value chain is represented in Figure 2.10. The first interesting feature is that only 33% of the carrier CAPEX is injected along the equipment value chain. The other CAPEX is invested in other elements of the network, as reported in the table included in Figure 2.10. Moreover, while the main part of this value transits up to system manufacturers, only a small part goes down along the hardware value chain toward module manufacturers. This is due to the great design and testing effort needed to design and manufacture tele- communication equipment that imposes on system vendors great investments in terms of development structures and testing grounds. Packet Broadband FIGURE 2.11 Average destination of those carriers' CAPEX invested in network infrastructures in Europe