The United State’s government’s topsy-turvy tariff policy could hit the private 5G space, which has only just begun to gain some much-needed momentum.

ABI Research in a new report noted that the current U.S. tariff policy is one of several “destabilizing activities” that could impact private network adoption.

“For a market like that of private cellular, which largely relies on customer willingness to invest in new infrastructure to innovate, this could significantly impact sales for mobile network operators (MNOs), system integrators (SIs), and, most notably, infrastructure vendors,” Shadine Taufik, research analyst at ABI Research, wrote in a new report. “Although it has gained major ground and enterprise recognition recently with the rise of use case-centered offerings from market leaders such as Verizon, higher prices may be enough to dissuade customers from engaging in private cellular implementation – especially in the short term.”

Taufik explained that private networks typically rely various hardware, software, and services components, most of which are manufactured outside of the U.S., “giving rise to a complex supply chain.”

“In the United States, intangible assets such as software and services are exempt from these tariffs; however, potential markups of up to 25% on hardware (including radio access networks [RANs] and private cellular core hardware) may be prominent as suppliers look to shift costs onto their customers and create a higher total cost of ownership, blocking out small and medium enterprises (SMEs) from adoption,” Taufik noted.

The report did add that this pricing challenge could force vendors to move already constructed equipment to other markets, potentially at a discount. “Long term, this will reduce the profitability of these firms, as demand equalizes – these players have lost one of the most mature private cellular markets in the world,” Taufik wrote.

One potential beneficiary from this tariff-induced uncertainty could be vendors that are more reliant on software-based private network platforms, which could increase focus on partnerships with hyperscalers.

“Vendors must accelerate product roadmaps in this domain, and potentially partner with existing hyperscalers, such as [Amazon Web Services] and [Microsoft] Azure, to host their virtualized RAN and core solutions,” Taufik explained. “Enterprises already use cloud services in their operations, and gradual hardware decoupling will not only benefit them from a price perspective, but vendors as well.”

Private 5G networks have momentum, but remain fragile

That uncertainty comes on the heels of what was viewed as a relatively successful 2024.

Dell’Oro Group reported that private radio access network (RAN) equipment sales surged more than 40% last year. Vendors driving that growth included Huawei, Nokia, Ericsson, and Samsung.

“Private wireless is currently one of the more exciting RAN segments, partly because of the more favorable growth trajectory compared to the broader RAN market,” Stefan Pongratz, VP at Dell’Oro Group, wrote. “While it is still early in the private 5G journey, and it will take some time before enterprise spending will move the larger RAN needle, initial readings suggest private wireless moved above the noise in 2024, representing around [3% to 5%] of total RAN.”

The research firm added that it expect the market to grow at up to a 20% compound annual growth rate over the next several years, accounting for up to 10% of total RAN sales by 2029.

That growth was backed by recent executive comments.

Verizon CEO Hans Vestberg during the carrier’s most recent earnings call that its long-standing “private networks business continues to scale,” and touting it had “closed more than a dozen deals in the quarter.”

Callie Field, president of T-Mobile US’ Business Group echoed that notion, pointing to the carrier’s success in powering private 5G and network security slice platform for a Disney Studios production. “That was a very cool use case,” Field said during the carrier’s first-quarter earnings call.

Other analyst firms have also found growing enterprise interest and success with deploying private networks.

A recent survey-based report from CCS Insights highlighted early benefits gleaned from initial private network deployments. The firm found that two-thirds of enterprises that were early adopters of private networks “reported productivity improvements as a direct result of operating a private LTE or 5G network, with 55% achieving a return on investment in less than two years.” Those surveyed noted that they selected private 5G over a Wi-Fi solution due to “improved coverage, security, reliability, and network performance.”

Despite these positive outcomes, the private network ecosystem remains fragile. Analysts have noted that enterprises looking to deploy a private network are having to weed through a maze of carriers, equipment providers, and SIs, all touting their market advantages.

Dan Hays, a partner at consulting firm PwC, said the recent Mobile World Congress (MWC) event in Barcelona showed “there was notably less noise about private networks than there has been the last few years,” adding, “I think that they’ve become an accepted model, but one that still is kind of a little bit unproven in its value proposition.”