5G not just hype, but offers real investable opportunities (The Business Times)

There is no doubt that 5G is going to change the world. The impact it will have on a wide range of industries will likely be bigger than we have seen with any previous generation of mobile telecommunications.

Each previous new generation of network has produced a big jump in speed. And we will certainly see this with 5G, which is estimated to be between 10 and 100 times faster than 4G.

But 5G is about much more than quicker phone downloads. It brings lower latency, greater network capacity, and significantly extends battery life. In time, this will produce a robust network in which millions more devices will communicate with one another.

This is what opens the door to 5G’s full potential: the capacity for machine-to-machine communication.

The initial impact will be gradual. Most countries are not yet actively rolling out 5G infrastructure. However, there has been initial build-out in the US, UK and other parts of Europe, and much more extended implementation in China, South Korea and Australia.

Why is global adoption slow? To some extent, this is an inevitable lag – 4G took six years to achieve 90 per cent penetration. In the case of 5G rollout, it is partly down to physics: 5G is a high-performance network because of its high frequency, but its shorter wavelengths are more readily absorbed by objects, meaning that the 5G signal does not travel well through buildings and is even absorbed by plants and rain. In practical terms, there needs to be more base stations positioned much closer together. Putting a 5G system in place will take some time. It will not be the immediate revolution that some expect.


A helpful framework for the journey through 5G investment over the next five years is to think of 5G companies in three layers:

5G providers. These are the telecoms companies that provide 5G services. While research suggests incremental revenues for telecoms will grow, they are expected to remain relatively small in dollar terms until the middle of the coming decade, when a real acceleration is anticipated, which could, in principle, be attractive.

But there is a problem: building the infrastructure to access those revenues is going to require massive, upfront capital expenditure, compressing the margins of telecoms companies and making them a less compelling investment.

5G enablers. This second layer comprises the organisations building infrastructure and providing the components necessary to take part in 5G. I believe this is currently a much more attractive area than the providers. The demand for cell towers, network equipment, devices, components and data-storage requirements over the next few years could see very significant growth.

The semiconductor industry is likely to be another beneficiary of 5G. High-performance applications such as 5G require even smaller semiconductors. Device and component makers that produce memory chips, organic light-emitting diode (OLED) display screens, mobile phones and consumer electronics (or the Internet of Things) are positioned to benefit from the increased connectivity of 5G.

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The Business Times

18 June 2020

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