Mobile Technology and the Promise of 5G | DIGI

Part 1: Digital Infrastructure and Connectivity Overview

Part 2: Mobile Technology and the Promise of 5G

Part 3: 5G: Another step in the evolution of infrastructure

“A customer used to have a 1.5 meg connection and used it occasionally during the day… Now they’re using it for hours—and in some cases all day—it’s having a burden on our network, requiring us to buy more bandwidth.”[1]

Mobile technology and the promise of 5G

• According to GSMA Intelligence, between 2020-2025, mobile operators will invest around $1.1 trillion worldwide in mobile capex, excluding spectrum acquisitions, with roughly 80% spent on 5G networks[2]
• By 2025, GSMA Intelligence forecasts 25.1 billion connected objects up from 10.3 billion in 2018
• 5G handsets will generate almost $20 billion annually in global royalties for intellectual property (IP) holders in 2025, according to Strategy Analytics.
• The South Korean government targets 2026 as the year in which it will begin its 6G trials with a stated goal of having that technology and those networks commercially available between 2028-2030[3]

Much like the evolution of the US road system, we have seen the global digital infrastructure deploy new technologies to increase both network speeds and capacity as businesses and consumers have driven digital usage, clogging the existing network in the process. What’s different is the global nature of this buildout; as more people have more devices chewing through or generating more data, there is an ongoing race for network operators and broadband providers to boost the coverage and quality of their network by backfilling in existing technologies, such as 3G, 4G, cable, fibre and related backhaul technologies, as well as deploying new ones, such as 5G and gigabit fibre, and in some cases changing their technology strategy. An example of that last point is found with Verizon (VZ), which after halting its FiOS build out in 2010, is testing a 5G network service for in-home wireless service – a far more cost-efficient solution than laying fibre, especially when data speeds rival FiOS wired speeds (100 to 500 Mbps for FiOS vs. 300 Mbps to peak speeds of nearly 1 Gbps for 5G). 

Source: Statista, June 2020[4]

According to the Consumer Technology Association, 5G data speeds could reach up to 10Gbps, which would make it possible to download a two-hour movie in less than four seconds versus six minutes on 4G. The higher frequencies that make such speeds possible also enable directional radio waves that can be targeted. The 5G antennas, which will be able to handle more users and more data, beam out over shorter distances, which means we will need more of them. Extra repeaters will need to be installed across cities. We could see modems and WiFi routers being replaced in the future with 5G small cells to bring those 5G connections into homes and businesses, which could end up doing away with WiFi or wired connections entirely in homes and offices. Indeed, an emerging trend in current home WiFi networks is a shift away from a single wireless point to so called “mesh networks.”

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Building out the 5G network comes with a hefty price tag. According to the Heavy Reading Mobile Operator 5G Capex report, spending on 5G globally will rise from $16 billion in 2020 to $59 billion by 2022 and $88 billion by 2023. According to data published by GSMA Intelligence, between 2020-2025, mobile operators will invest around $1.1 trillion worldwide in mobile capex, excluding spectrum acquisitions, with roughly 80% spent on 5G networks[5]. Some operators in the most developed markets are upgrading their 4G networks to faster speeds and lower latencies, while 5G investment is still in its infancy.       

How 5G will spur unquenchable demand for use and generation of data, driving additional digital infrastructure spending

As these connective networks are built out, the very usage of them will drive further demand for greater and greater capacity. The greater the capacity, the greater the demand for more in a virtuous circle in which increased supply generates incremental demand. These range from data centres and the equipment they house to new chips and components that power and connect devices that will talk to existing and next-generation networks.

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• As we can see in the above chart, Statista forecasts that by 2025 5G smartphone shipments will reach roughly 1.5 billion worldwide, up from 2 million units in 2019. 5G phones will need even more RF semiconductors than 4G and drive even great demand for chips that can communicate with 5G and existing wireless networks. 5G handsets will generate almost $20 billion annually in global royalties for intellectual property (IP) holders in 2025, according to the latest research from Strategy Analytics.
• IDC expects spending on off-premises cloud IT infrastructure will grow at a five-year compound annual growth rate (CAGR) of 10.8%, reaching $55.7 billion in 2022.
• Network operators will spend $75 billion on optical transport systems over the next five years, predicts the Dell’Oro Group, driven by rollouts of 5G mobile and next-generation fixed broadband technologies and data centre interconnect requirements.
• Base station shipments are expected to eclipse 20 million over the next five years, according to the Dell’Oro Group, as carriers support the mobile broadband usage, next-generation network deployments, and support new applications including IoT, Fixed Wireless Access, Public Safety, and Enterprise, which are expected to increase nearly fourfold over the 2018-2022 period.
• The global Data Centre Deployment Spending market is estimated to have hit $168.54 billion in 2018 and is expected to reach around $240.61 billion by 2025, a CAGR of around 5.22% between 2019-2025.[6] This reflects the continued rise in internet usage and breakthroughs in the IoT along with the large-scale demand for new data centres.
• IoT sensors and other data streams will give manufacturers new insights up and down the supply chain, from customer demand signals to their suppliers’ own internal processes, however, they will require chips and network capacity to do so.  While IoT is growing in consumer markets, such as consumer electronics and smart home devices, the industrial IoT segment will be the largest source of growth going forward. By 2025, GSMA Intelligence forecasts 25.1 billion connected objects (53% industrial) up from 10.3 billion (41% consumer) in 2018.[7]

As newer connective technologies mature, we will see a shift in what network operators are buying. For example, in 2016 2G, 3G and 4G wireless network infrastructure spending reached $56 billion, but according to SNS Research, 5G networks are forecast to account for more than 80% of wireless network infrastructure spending by the end of 2025.[8] According to Qualcomm, 5G’s full economic effect will likely be realized across the globe by 2035 and will potentially enable up to $13.2 trillion worth of goods and services. The 5G value chain, which includes OEMs, operators, content creators, app developers, and consumers could support up to 22.3 million jobs, and over time, the total contribution of 5G to global GDP is expected to be roughly equivalent to a country the size of Italy, which has the eighth largest economy in the world.

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This finding implies continued growth in 5G well past 2025, but given the long lead time in developing subsequent technologies, it should come as no surprise that we are already starting to hear rumblings over the technical protocols that will follow 5G. The Academy of Finland has announced the funding of "6Genesis," an eight-year research program to conceptualize 6G under the auspices of the University of Oulu's Centre for Wireless Communications. Already the South Korean government targets 2026 as the year in which it will begin its 6G trials, with a stated goal of having that technology and those networks commercially available between 2028-2030.[9] These trials aim to achieve 1Tbps in data transmission speeds, which amounts to roughly five times faster than 5G and latency reduction to one-tenth of current 5G services. Much like the multi-decade evolution in the US highway network, we have much road ahead of us when it comes to improving the global Digital Infrastructure backbone.

The chips that make digital connectivity happen

• By 2025, Statista forecasts more than 2.7 billion mobile 5G subscriptions worldwide.
• 5G smartphone shipments are expected to grow to 1.5 billion units by 2025 vs. just 2 million in 2019. 5G phones will need even more RF semiconductors than 4G, drive even great demand for chips that can communicate with 5G and existing wireless networks
• Forecasts have the global RF semiconductor market growing to $26.2 billion by 2025 up from $17.4 billion in 2018, a compound annual growth rate of 8.5%.

While there have been several devices that connect to mobile networks, including PCs, tablets, and wearables, the original big seller was the mobile phone. While such a rudimentary device can still be found if one searches high and low, it has been replaced by the ubiquitous, wondrous and highly addictive smartphone. Smartphones don't just make calls -- they are used increasingly to access the internet, shop, chat, stream videos, interact on social media, and access other services.

In 2019, smartphone shipments totalled 1.38 billion, down modestly from 1.41 billion in 2018 according to data published by IHS Markit[10], but as we’ve seen in the past, the deployment of next-generation networks that bring greater data speeds tend to foster a smartphone upgrade cycle. For context, at the end of 2019 GSMA found there were 5.175 billion unique mobile subscribers across the globe. Just 2 million 5G phones were shipped in 2019 according to Statista, which sees roughly 77 million being shipped by the end of 2021. That number is expected to explode higher in the coming years as 5G networks start to light up across the globe, reaching 1.5 billion units by 2025. But it’s not just smartphones that will be spurring data consumption. From smart homes to the smart grid and from industrial applications to wearables, the number of connected devices is rapidly proliferating. Statista forecasts the number of 5G mobile subscriptions will exceed 2.7 billion by 2025, while IHS Markit Ltd. projects the Internet of Things (IoT) market will grow from an installed base of 15 billion units in 2015 to more than 75 billion units by 2025.

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We admit those are some aggressive and exponential growth forecasts, but they hinge on the seemingly unquenchable thirst for connectivity and data that will only continue to grow with 5G’s quicker data speeds, greater network bandwidth capacity, and lower latency. Findings from Deloitte Insights seem to confirm the expected consumer uptake in 5G:

• 67% of consumers said they would be more likely to upgrade to a 5G-compatible smartphone when 5G becomes available[11];
• 62% of consumers said they will likely replace their home internet with 5G Wi-Fi service;
• More than 40% of Gen Z consumers said they will play more mobile video games with 5G;
• Nearly 35% of Gen Z and millennials said 5G would change how they use augmented reality and virtual reality (AR/VR); 
• 62% of home automation users rank 5G's potential to offer better connectivity in the home as one of the top three capabilities likely to drive them to use 5G. 

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Here’s the thing: In order for all of those devices to connect to a mobile network they will need RF semiconductors, which perform tasks such as amplifying and filtering wireless signals. That market is slated to explode in the coming years. Forecasts have the global RF semiconductor market growing to $26.2 billion by 2025 up from $17.4 billion in 2018, a compound annual growth rate of 8.5%.

There are two key drivers of that forecasted growth rate – first is the sheer volume of devices that use semiconductors and the second is the greater number of RF semiconductors needed per 4G or 3G device. The reason for that greater RF content per 5G device is twofold in that not only do those devices need to be backward compatible, as we mentioned above, but they also need to connect to the 5G networks that are utilizing different frequency bands.

As a result, a 5G smartphone will need to be able to connect across 30 frequency bands compared to 15 with a 4G smartphone, which means a significantly greater number of filters, switches, and power amplifiers are needed. All told, RF semiconductor content is expected to reach $25 per 5G smartphone compared to $18 for a 4G model and $8 for a 3G one. For the trivia buffs out there, a basic 2G mobile phone contained just $3 in RF semiconductor content.

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