13th Dec 2021
Near lag-free communications and ultra-low latency networks sounded like a fairy tale when 5G first appeared in the media, and many skeptics thought that 5G’s benefits would remain in the realm of fiction.
But the last few months have brought enormous advances in every 5G subsector, joining to create a flywheel that’s generating significant energy in the broader 5G ecosystem, raising the profile of 5G stocks, and encouraging investors in 5G stock to add to the momentum.
The 5G flywheel
Telecommunications networks are transitioning away from 3G to dedicate resources to 5G, which is in turn encouraging companies and individuals to deploy 5G-compliant equipment and devices.
At the same time, this increased adoption of 5G systems reassures networks that it’s safe to power ahead with their 5G rollout. 2021 saw pandemic trends like increased media consumption and cloud gaming, remote working and schooling, telehealth, and smart manufacturing come together to add power to the 5G flywheel.
Meanwhile, crucial 5G capabilities and vital 5G infrastructure are keeping pace, pushing the 5G flywheel to spin smoothly while benefiting from its movement. Each subsector and use case is reliant on the flywheel as a whole, but is also lending motive power to keep the wheel in motion and boost the best 5G stocks.
Networks transitioning from 5G are driving deployment
As internet providers phase out 3G services, consumers scramble to switch to 5G devices. AT&T, for example, announced that it will stop offering 3G connectivity by February 2022, which means that millions of 3G-dependent systems such as home alarms will become obsolete unless owners upgrade them.1
5G is contributing an ever-larger percentage of telecommunications revenues, which further encourages companies to commit more resources. Gartner reported that 5G represented 39% of total wireless infrastructure revenues this year for communication service providers (CSPs), and predicted that it would grow from $13.7 billion in 2020 to $19.1 billion in 2021. By 2024, its analysts claim, 5G coverage in tier-1 cities is expected to have reached 60%.2
5G infrastructure growth supports 5G networks
As internet providers transition, they need 5G infrastructure, including network hardware and software, in place ready to carry 5G connectivity. The global 5G infrastructure equipment market is forecast to grow at a compound annual growth rate (CAGR) of 69.4%, from $3.46 billion in 2020 to $5.86 billion by the end of 20213. Looking further ahead, the broader 5G infrastructure sector is expected to expand at a CAGR of 55% to reach $115.4 billion by 2026.4
A beneficial loop is emerging. 5G infrastructure is keeping up with telecommunications providers, which are transitioning to ensure there’s enough resources for 5G networks to meet demand, but the transition itself is generating demand by forcing end users to upgrade to 5G sooner than they might otherwise have done.
5G systems adoption keeps the flywheel in motion
Nonetheless, adoption of 5G-ready and 5G-dependent equipment and devices is swift and is driving demand. One study attributes the expansion in 5G infrastructure to the rise in smart city networks, such as self-regulating traffic lights, automated traffic redirection, and artificial intelligence(AI)-powered security systems5. PWC calculates that 5G applications in smart utilities management will add $330 billion to global GDP by 20306.
Manufacturing too plays a key role; for example, the global Industrial Internet of Things (IIoT) market is expected to reach $110.6 billion by 20257. IIoT is a key building block in the development of smart factories and machine to machine (M2M) communications for robotic “lights off” production. It relies on 5G for the low latency and high-speed data sharing that will make those innovations a reality.
5G in healthcare is another player, with the market forecast to grow at a CAGR of 76.3%, from $215 million in 2021 to $3.6 billion by 2026. The pandemic-driven adoption of telehealth and robotic surgery, together with the rise in use of wearable and embedded medical devices, are seen as driving this trend8.
5G subsectors oil the wheel
Finally, crucial 5G capabilities are both keeping pace with demand from 5G networks and infrastructure, and are fundamental to their expansion. The market for drive testing equipment for 5G systems is just one example. Frost & Sullivan forecast that it will reach $522.5 million by 2025, growing at a CAGR of 15.6%9.
The growth in this subsector is attributed to the rise in high capacity networks, low latency connectivity, and mass machine communications, but these companies are also under pressure to innovate new and better drive testing solutions in order to ensure that the broader 5G ecosystem stays on track.
“Deployment of fifth-generation new radio (5G NR) is creating complex and new drive testing requirements. Today, most 5G networks are rolled out in the 3.5 GHz spectrum band, increasing the demand for drive testing and propagation model tuning,” agreed Sujan Sami, Research Manager at Frost & Sullivan10.
The 5G flywheel is spinning freely
Between rising adoption of 5G equipment and devices, the added push from internet network providers transitioning to 5G, and the growth of vital 5G infrastructure and services, the 5G flywheel is well-oiled and spinning rapidly.
It’s not surprising that this movement is also driving momentum for people to invest in 5G, with investors paying renewed attention to the best 5G stocks to buy for long-term growth. As more investors search for the top 5G companies to invest in, one option is to turn to an ETF like Defiance’s FIVG ETF, which focuses on 5G companies’ stock. A 5G ETF allows you to spread your investment across a number of top 5G stocks with a single trade, helping to mitigate your exposure to risk and remove the difficulty in choosing which 5G stocks to buy.
1 “Sounding the alarm: It’s time to upgrade for 5G” October 2, 2021 https://news.yahoo.com/sounding-alarm-time-upgrade-5g-171600045.html
2 “Gartner Forecasts Worldwide 5G Network Infrastructure Revenue to Grow 39% in 2021” August 4, 2021 https://www.gartner.com/en/newsroom/press-releases/2021-08-04-gartner-forecasts-worldwide-5g-network-infrastrucutre-revenue-to-grow-39pc-in-2021
3 “5G Infrastructure Equipment Global Market Report 2021” January 2021 https://www.thebusinessresearchcompany.com/report/5g-infrastructure-equipment-global-market-report
4 “Global 5G Infrastructure Market Report 2021” September 10, 2021 https://www.businesswire.com/news/home/20210910005400/en/Global-5G-Infrastructure-Market-Report-2021-Market-Is-Expected-to-Grow-From-12.9-Billion-in-2021-to-115.4-Billion-by-2026—ResearchAndMarkets.com
5 “5G Infrastructure Equipment Global Market Report 2021” January 2021 https://www.thebusinessresearchcompany.com/report/5g-infrastructure-equipment-global-market-report
6 “The global economic impact of 5G” https://www.pwc.com/gx/en/industries/technology/publications/economic-impact-5g.html
7 Statista, “Industrial Internet of Things market size worldwide from 2017 to 2025,” accessed October 18, 2021 https://www.statista.com/statistics/611004/global-industrial-internet-of-things-market-size/
8 “The 5G in healthcare market is valued at an estimated USD 215 million in 2021 and is projected to reach USD 3,667 million by 2026, at a CAGR of 76.3%” October 12, 2021 https://www.globenewswire.com/news-release/2021/10/12/2312217/0/en/The-5G-in-healthcare-market-is-valued-at-an-estimated-USD-215-million-in-2021-and-is-projected-to-reach-USD-3-667-million-by-2026-at-a-CAGR-of-76-3.html
9 “5G Deployments Boost Global Mobile Network Drive Test Equipment Market, Finds Frost & Sullivan” October 4, 2021 https://finance.yahoo.com/news/5g-deployments-boost-global-mobile-063900489.html
10 “5G Deployments Boost Global Mobile Network Drive Test Equipment Market, Finds Frost & Sullivan” October 4, 2021 https://finance.yahoo.com/news/5g-deployments-boost-global-mobile-063900489.html