Last year the industry eagerly awaited 5G devices and asked themselves what the killer app would be. This year at Mobile World Congress Los Angeles the tone was different. 5G is finally here. Devices are available and plentiful. Networks are being proliferated. Downloading a movie on Netflix is now a better experience. Yet the real value of 5G is yet to be realized. The obvious quick consumer application is mobile video. However, the consensus seems to be that the real monetization will occur within the enterprise and industrial applications: oil, gas, healthcare, agriculture, industrial, retail, robotics, entertainment, transportation, security.
5G is not just about speed. It’s about the convergence of technologies to provide capacity. 5G technology will be coupled with other technology enablers such as Edge Computing, Cloud, IoT platforms, AI, ML, and WiFi 6 to bring this technology transformation to fruition in an economic and efficient manner. This effort will require collaboration and is being welcomed among the supply chain players. Operators have finally moved beyond the “dumb pipe” stereotype and have taken proactive steps in investing in partnerships to making 5G a reality. The O-RAN Alliance is an example of this where leading mobile operators are defining network requirements together with open interfaces enabling a dynamic ecosystem and network management using embedded intelligence.
The deployment of 5G services is not only dependent on devices and densification but spectrum availability as well. Dynamic spectrum sharing (DSS) was another common theme at the show this week where operators can harness the power of their 4G LTE networks as long as they have 5G NR ready equipment via a software enhancement. Operators can use their spectrum for both LTE and 5G without having to dedicate specific portion to each. DSS is a good solution in the interim as the end game will be to have a stand-alone 5G network.
Operators are aggressively turning on 5G in major metropolitan areas. In the US, Verizon’s mmWave network is slated for 30 cities by year end; AT&T Wireless is in 20 markets on its mmWave network, with plans to expand using its sub-6 GHz spectrum. Assuming a Sprint/T-Mobile merger, the combination of the 2 companies will offer a sub-6 Ghz network with breadth and depth. Speed, capacity, spectrum and most importantly densification will prompt the 5G user base to grow. Users want the benefits of 5G but the assurance of a continuous network when making the investment into the device.
Qualcomm (2nd gen x55), HiSilicon (Balong 5000) and Samsung (Exynos 9820) are the leading suppliers of 5G smartphone semiconductor solutions. Samsung just announced their 2nd generation 5G processor, Exynos 990 apps processor and Exynos 5123 5G modem, designed with localized AI functionality and better graphics capabilities. 5G devices also require a new RF front-end (RFFE) for 5G devices in order to efficiently manage the number and range of frequencies. IHS Markit’s Wireless Competitive Landscaping Tool, exhibits baseband and RF/IC revenues already being shifted from LTE to 5G.
In Q2 2019, LTE baseband revenues totaled $3,716m and 5G revenues were $137m, that is 4% of revenues moved into 5G. LTE RFFE revenues totaled $898m and 5G RFFE revenues totaled $85m in Q2 2019, which means that 10% of LTE revenue shifted into 5G technology.
The opportunity for growth is larger in the RFFE as its implementations need to optimize to increase spectral efficiency, which translates into increasing revenue streams for RFFE components like filters, LNAs, PAMs, duplexers, antennas (MIMO) from both OEMs and carriers. Moreover, the O-Ran alliance offers opportunities for suppliers to enhance revenue streams by offering open solutions providing flexibility, scalability and performance. At MWC-LA, Movandi and KT demonstrated Movandi’s Beam X RFFE which addressed connectivity issues with regard to mmWave. Lower power output in mmWave and smaller cells means that more nodes are required when deploying a mmWave network, which relates back to the premise that densification of the network is what will drive revenues in 5G.
5G is here and the ecosystem is coming together for an explosive technology transformation. In the past the consumer was the primary benefactor of each generational upgrade, but going forward, the enterprise is expected to reap the rewards of 5G and how these use cases will change the way we work and live coupling AI and 5G, collaborating with value chain players and converging technologies. However, densification and a true nationwide network is what will spur the ubiquity of 5G. As this transformation occurs, the revenues will increasingly shift into 5G supply chain.