30th Mar 2022
5G describes the technological innovation and infrastructure that will likely support the next era of mobile connective technology. Its adoption should provide faster speeds, more functionality and lower latency (the delay between input into a system and the desired outcome, i.e. the time for data to travel between two points), facilitating substantial innovation in a much wider number of use cases than previous mobile technology. 5G applications do not focus purely on the consumer; they can also transform work practices and production in industry, healthcare, transportation and manufacturing, gaming, retail, business and education.
5G is the technology that will support smart cities, remote medicine and eSports
Major market actors, including telecommunications companies, governments, infrastructure providers and hardware firms, have been researching and developing 5G capacities for years. AT&T, T-Mobile, and Verizon have already launched their networks across thousands of US cities, with Verizon’s 5G Nationwide service alone covering 2,700 cities in the US1. Rising mobile data traffic and the increased adoption of virtual networking architecture in telecommunications continues to push the technology to fruition. Gartner analysts predict that tier-1 cities will have 60% 5G coverage by 2024, having noted that 5G accounted for 39% of total wireless infrastructure revenues for communication service providers (CSPs) by August 2021. It predicted that revenues would rise further to $19.1 billion by the end of 2021, up from $13.7 billion in 20202. This will build on the LTE (4G) networks run by 791 operators in 228 countries worldwide, which provide mobile and/or Fixed Wireless Access (FWA) services, and which act as a foundation for future 5G network upgrades.3
The 5G rollout became a global phenomenon in 2019, when South Korea was the first country to achieve a nationwide network. It saw 1 million subscribers within 69 days of launching, finished 2020 with nearly 12 million4 and reached over 19 million by the end of October 2021.5 International commitment to the 5G rollout has also been demonstrated recently by the passage of the Biden Infrastructure Plan in November 2021, which allocated $65 billion to growing access to broadband and 5G connectivity6, and the trade wars between the US and China for dominance over 5G infrastructure with reciprocal bans on 5G companies Huawei and Ericsson. It’s estimated that 79 countries worldwide either commercialized 5G networks or ran trials for that purpose by the end of 20217, and as of late November, 170 mobile operators around the world had launched a commercial 5G service, collectively penetrating to 7% of the population8. All told, a September 2021 assessment predicted that the global 5G infrastructure market would reach $49.64 billion by 20289.
Expansion of 5G infrastructure has an impact potential far beyond the smartphone industry, promising to impact every aspect of society and drive new economic activity. Analysts at PWC calculated that 5G could bring an economic uplift of at least $ 1.3trillion in the US alone, driving up sectors that include healthcare, utilities, financial services, manufacturing, and consumer and media applications10 JP Morgan analysts agree, forecasting that enterprise could receive a $700 billion boost from 5G-driven opportunities11.
We believe that 5G will bring disruptive transformations in three key areas: Enhanced mobile broadband, the massive Internet of Things (IoT) and mission critical services. IoT connections are growing rapidly, with JP Morgan forecasting that China alone will reach 2.5 billion IoT connections by 2025, with Japan and South Korea hitting 150 million12. 5G could also support institutional change that fosters the emergence of original business models, thereby advancing new ecosystems of technologies and industries that engage in its wide use-functions.
For example, 5G supports Edge computing, which is when processing power and data storage are brought closer to data sources such as IoT devices or local edge servers. The Edge improves response times, saves bandwidth and will support more seamless automation and coordination among disparate systems. Verizon’s 5G tech, for example, is already supporting global pharma track-and-trace solutions, which improve inventory management, demand and use evaluation, patient safety and cost control13.
Cooperation between the supply and demand sides of the market (telecom companies versus industry/energy/transport businesses and consumers) comprises a robust value and supply chain and contributes to the expected success of the 5G market. The consistent and steep worldwide growth in broadband subscription reflects the strong underlying demand for ever-improving data access and processing (see graph below). 15 million homes in 57 US markets now use Verizon’s 5G internet, with the number expected to rise to 30 million by the end of 202314.
Covid has normalized the work from home paradigm with its dependence on smooth communication, data sharing and security and remote collaboration; all of which are facilitated and enhanced by 5G. According to EY, 52% of enterprises chose to investigate 5G and IoT because of the impact of COVID-1915.
What is 5G?
If 1G describes the technology that enabled the first cellphones, 2G brought text messaging, 3G internet access to the cell phone and 4G higher speeds (albeit in an overloaded network); then 5G brings the industry the capacity for even lower latency, more sophisticated apps, instantaneous availability of information and more structured and relevant capabilities. But 5G is not just about cell phones. 5G is the bundle of technological advances that will likely enable autonomous driving, the internet of things (IoT), cloud computing, mass participation in eSports and significant developments in the use of virtual or augmented reality (VR/AR) products.
While the configuration and collaboration of technologies that comprise 5G is not yet final, the core features will include:
- Leveraging of new bandwidths – The range of millimeter wave frequencies currently in use (usually up to 6Ghz) are becoming overcrowded, resulting in slower service and mixed connections. 5G will exploit a much greater spectrum (30-300 GHz) of shorter waves, greatly increasing network capacity. The European Commission for the EU, the Asia Pacific Telecommunity for the Asia Pacific (APAC) region, and the Federal Communication Commission (FCC) in the United States are already pursuing initiatives to open up other bandwidths to 5G.
- Small Cell Antennae – The shorter millimeter waves don’t travel well through buildings and are absorbed by rain and plants. They therefore require a network of thousands of small, low powered mini base stations to work in relay to pass data around obstacles and maintain service.
- Massive MIMO – Multiple Input Multiple Output cellular antennae stations – MIMO stations would have around 100 ports (in contrast to 4G’s 12) and could increase capacity of networks by a factor of 22 or more.
- Beamforming – In contrast to 4G dispersed wave signals, MIMO stations strategize the best route for a focused stream of data from the base to a specific user. This increases efficiency and avoids interference, resulting in a coherent, personalized data stream. It also allows for network slicing, where certain network functions are reserved for certain users- these could be premium customers or mission critical services such as remote driving or medical procedures.
- Full duplex – Radio waves are reciprocal – they travel forward and back on the same frequency, meaning that today’s antennas can only either send or receive data at any one time. To avoid this, researchers are formulating scalable orthogonal frequency-division mulitiplexing (OFDM): using silicon transistors to create high speed switches that momentarily hold back signals, so they can pass on the same frequency. This should bring lower latency and forward compatibility.16
2022 where do we stand?
Last year PwC reported that US mobile operators had collectively covered 75% of the country with 5G; expecting it to reach 80% by July.17 Since Apple launched its first 5G compatible iPhone 12 in October 2020, the number of 5G-compatible handsets has snowballed to the point that it’s more unusual to find a model that doesn’t support the new connectivity standard. Ericsson launched over 400 5G smartphone models in 202118 and JP Morgan calculates that 725 million 5G phones were sold that year, referring to it as “the biggest year in terms of growth.” It predicts that 2022 will see sales rise even more sharply19. Companies such as Qualcomm and Intel have produced 5G modems that will be compatible with network operators. In May 2021, Qualcomm launched its first custom-built IoT modem chip, fully optimized for industrial IoT applications and with 5G connectivity baked in20, and Apple is planning to reveal its 5G modem chip in its 2023 iPhone models21. On the infrastructure side, companies such as American Tower and Crown Castle continue to develop their large portfolios of strategic rooftop sites to streamline the connectivity that 5G expansion requires. American Tower for example, manages access to 5,500 rooftops; and CC’s over 40,000 towers, 70,000 on-air or under-contract small cell nodes, and more than 75,000 route miles of fiber connections are strategic elements in the 5G rollout22. January 2022 saw Crown Castle ink a 12-year agreement with T-Mobile which will see CC support T-Mobile’s ongoing 5G network rollout with increased access to its small cell locations and towers.23
Five 5G Applications
- Smart driving: A 2016 Huawei White Paper reported the estimation that if 90% of vehicles in the United States were automated, the number of traffic accidents would decrease by nearly 80% and the number of fatalities by about 60%. The same paper reported the US National Highway Traffic Safety Administration‘s prediction that light and medium-sized vehicles with vehicle-to-vehicle communications (V2V) could avoid 80% of accidents24, and large vehicles with V2V could avoid 71% of the accidents. In 2016, Accenture suggested that all new cars would be connected by 202525, and analysts in late 2021 concurred that the market is on track to hit that target26, with the connected car market in the US having grown 16% YOY in 202127. Smart driving is a clear example of how strong consumer and industry interest and uptake of 5G technology could encourage telecom companies to invest in the necessary research and development (R&D) and infrastructure to partner with industry for market share.
Indeed Nokia was a founder of the “5G Automotive Association” (5GAA)” established in 2016 with 120 plus members. This body aims to unite automotive and telecommunications to accelerate the introduction of intelligent transport and communication solutions. According to CounterPoint, 25% of connected cars will use 5G by 202528. In 2020, Qualcomm launched its first “Car-to-Cloud Service”, and has been consistently updating its features to provide carmakers with the best possible connectivity for connected vehicles. The latest Snapdragon digital chassis, launched in February 2022, “brings new technology collaborations to support out-of-the-box connectivity, integrated analytics and a cloud and device developer environment aimed to deliver new technology features, content and services globally”29.
- Smart Grids: Based on the principle that everything in the grid is connected, monitored and controllable, smart grids are now regarded as an indispensable component of national energy strategies in many markets, including China, Europe and the United States. They integrate information, telecommunication and automation into traditional power systems, revolutionizing the way energy is stored, delivered and sold. They require 5G’s intelligent, comprehensive and reliable network which would provide very low latency for immediate data sharing and wide coverage, high bandwidth and a massive web of connections to millions of smart meters. In return 5G could enable significant social and environmental benefits due to the reduced power usage and wastage.30 Deloitte reports that 26% of utilities companies are already using 5G, and another 36% intend to incorporate it in the near future31.
- Smart Healthcare: From remote controlled telemedicine to EMT’s having immediate access to information on a patient, there is wide acknowledgment of the potential of eHealth to increase the availability and decrease the cost of medical services. Mobile devices are already being used as part of medical diagnosis or treatment all around the world. 5G advances are starting to actualize market potential in telehealth services, personal health monitoring, remote surgery, and commercial wearables, and there are predictions that augmented reality (AR) headsets that enable physicians to view inside the body are on their way. Robotic surgery through 5G networks has already taken place, and early studies reported positively about the possibility of robotic spinal surgeries. The pandemic continued to drive an uptick in 5G applications for telehealth, remote healthcare, and remote patient monitoring in 2021. 5G is already being applied for collecting and integrating patient data to ensure that all healthcare workers can access accurate information in real time, and 5G connected hospitals are under construction in South Korea32. Analysts at JP Morgan predict that using 5G for remote patient monitoring could drive a 16% reduction in costs33
- AI-Assisted Living – 5G’s hyper connectivity and network slicing could support mission critical services in real time. A digital assistant, worn by the user, could continually gather information about the environment, process it and feed back directions, with almost invisible delay. Artificial Intelligence augmentation in daily life could become the norm. Connected toilets which monitor diet and disease markers, smart beds which track sleep quality, and smart medicine cabinets which dispense and refill medication are already here34
- Drones – 5G supported drones (autonomous, unmanned, aircraft) were one of the biggest new tech trends of 2021. August saw Qualcomm launch the first 5G and AI-enabled drone platform for organizations to use to develop customized drones on the 5G networks35. Vodafone and Ericsson have already successfully tested sky corridors for 5G drones in Germany, and BT has launched the first commercial drone corridor in the UK. 2021 saw ongoing tests for new drone applications, management, regulations, and more, which will form the foundation of a wider drone network36. Imagine, a network of flying machines, independently surveilling, delivering, inspecting and transporting. 5G drones could empower a new digital airspace economy.
Catalysts for growth
Industry is already partnering with Telecom companies as the ‘best enablers’ for new applications, giving both partners the confidence to invest in R&D and infrastructure to make the move to 5G effective, sustainable, innovation-welcoming and profitable. For example, automotive manufacturers see the potential in 5G networks as a platform to open up new revenue streams and business models, including in-car entertainment or flexible rental charges based on the car/route used. Their industry-centered technological advancements could propel further investment by 5G providers. Deloitte reports that 58% of networking executives across all industries are deploying 5G or running pilots37.
Governments that support private investment in 5G through intellectual property protection, availability of risk capital, spectrum licensing and the facilitation of R&D position themselves to embrace the innovation and potential associated with 5G’s ubiquity in the economy.
Consumer demand should grow with the understanding that people will benefit from wireless, untethered, immersive experiences that enable them to watch movies and live sports programs, play games, shop online and work remotely with convenience, freedom and efficiency. Such services could also enhance cooperation and interaction in fields like education, training, construction, city planning and oilfield exploration. It’s estimated that 5G mobile subscriptions will reach 4.1 billion, or 37.1% of total global mobile subscriptions, by the end of 2026.38
FIVG, the First 5G ETF:
- Is a diversified basket of stocks that can potentially benefit from the expansion of the 5G market. Rather than buy one or two individual equities focused on this sector, investors can invest in a way that provides diversification while maintaining a targeted view for their portfolio.
- Will have access to companies leading the 5G rollout, including Verizon, AT&T, Samsung, Nokia, Ericsson, Qualcomm, Skyworks Solutions, Cisco, Broadcom and Xilinix.
- Is a cost-effective way to access the 5G disruptors with an expense ratio of 0.30%.
Investment Case for FIVG: The Next Generation of Computing
1 “Verizon Stock: Outsized Returns With Extended 5G Rollouts In 2022” January 14, 2022 https://seekingalpha.com/article/4479585-verizon-stock-5g-rollouts-2022
2 “Gartner Forecasts Worldwide 5G Network Infrastructure Revenue to Grow 39% in 2021” August 4, 2021 https://www.gartner.com/en/newsroom/press-releases/
3 “NTS Statistics January 2022,” GSA.com, January, 2022. https://gsacom.com/technology/lte/
4 “South Korea ends 2020 with nearly 12 million 5G subscribers: report,” February 3, 2021. https://www.rcrwireless.com/20210203/5g/south-korea-ends-2020-nearly-12-million-5g-subscribers-report
5 “South Korea ends October with 19.4 million 5G subscribers,” Juan Pedro Tomás, December 1, 2021. https://www.rcrwireless.com/20211201/5g/south-korea-ends-october-19-million-5g-subscribers#:~:text=South%20Korea%20ended%20October%20with,million%2C%20according%20to%20the%20report.
6 “Broadband Dominates Tech Funding In Biden Infrastructure Bill” November 8, 2021 https://www.nextgov.com/emerging-tech/2021/11/broadband-dominates-tech-funding-biden-infrastructure-bill/186705/
7 “The 5G market is about to take off: What to expect in 2022 and beyond?” December 2, 2021 https://www.helpnetsecurity.com/2021/12/02/5g-market-2022/
8 “5G technology and networks (speed, use cases, rollout” January 25, 2022 https://www.thalesgroup.com/en/markets/digital-identity-and-security/mobile/inspired/5G
9 “5G Infrastructure Market size worth $ 49.64 Billion, Globally, by 2028 at 42.7% CAGR: Verified Market Research” September 29, 2021 https://www.prnewswire.com/news-releases/5g-infrastructure-market-size-worth–49-64-billion-globally-by-2028-at-42-7-cagr-verified-market-research-301387775.html
10 “The global economic impact of 5G” https://www.pwc.com/gx/en/tmt/5g/global-economic-impact-5g.pdf
11 “The Future of 5G Adoption” May 24, 2021 https://www.jpmorgan.com/insights/research/future-of-5g-adoption
12 “The Future of 5G Adoption” May 24, 2021 https://www.jpmorgan.com/insights/research/future-of-5g-adoption
13 Pharmaceutical supply chain, Verizon, https://enterprise.verizon.com/solutions/customer-success-stories/use-case-mec-and-pharma-supply-chain/?_ga=2.241545026.1188300861.1613295526-1041799425.1613295526
14 “Verizon Stock: Outsized Returns With Extended 5G Rollouts In 2022” January 14, 2022 https://seekingalpha.com/article/4479585-verizon-stock-5g-rollouts-2022
15 The 5G Economy: How 5G Technology will Contribute to the Global Economy, IHS, January 2017, p.13.
16 “Making 5G Real,” PwC, https://www.pwc.com/us/5g
17 “T-Mobile Just Turned on Its Nationwide 5G Network,” Kellen, December 2, 2019.
18 “Endless opportunity through a diverse network,” Crown Castle. https://www.crowncastle.com/network-infrastructure/#2. See also “Viewpoint: The case for better connectivity in D.C.,” John P. Drew, January 14, 2020. https://www.crowncastle.com/news/viewpoint-the-case-for-better-connectivity-in-d-c
19 “Crown Castle-backed Vapor IO raises $90M for nationwide edge rollout,” Monica Alleven, January 22, 2020.
20 “Crown Castle on Cutting Edge of 5G Innovation” Diane Rusignola, REIT magazine, November 15, 2020.
21 “Apple-Designed 5G Modem to Be Separate From A-Series Chip, Again Rumored to Debut in 2023 iPhones” November 18, 2021 https://www.macrumors.com/2021/11/18/apple-5g-modem-separate-from-a-series-chip/
22 “Endless opportunity through a diverse network,” Crown Castle. https://www.crowncastle.com/network-infrastructure/#2. See also “Viewpoint: The case for better connectivity in D.C.,” John P. Drew, January 14, 2020. https://www.crowncastle.com/news/viewpoint-the-case-for-better-connectivity-in-d-c
23 “T‑Mobile and Crown Castle Expand Strategic Relationship With Long‑Term Tower and Small Cell Agreement” January 6, 2022 https://www.t-mobile.com/news/business/t-mobile-crown-castle
24 5G Opening Up New Business Opportunities, Huawei White Paper, December 2016, p.8.
25 “Accenture, Connected Vehicle,” April 2016. https://www.accenture.com/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Dualpub_21/Accenture-digital-Connected-Vehicle.pdf
26 “Mobility Trends report for 2022” December 29, 2021 https://otonomo.io/blog/mobility-trends-report-for-2022/
27 “Global Connected Car Market Remains Resilient; 5G Cars Deployed Globally” February 15, 2022 https://www.counterpointresearch.com/global-connected-car-market-2021/
28 “Global Connected Car Market Remains Resilient; 5G Cars Deployed Globally” February 15, 2022 https://www.counterpointresearch.com/global-connected-car-market-2021/
29 “Qualcomm Unveils New Snapdragon Digital Chassis Connected Car Technologies to Accelerate the Future of Automotive” February 28, 2022 https://www.qualcomm.com/news/releases/2022/02/28/qualcomm-unveils-new-snapdragon-digital-chassis-connected-car-technologies
30 5G Opening Up New Business Opportunities, Huawei White Paper, December 2016, p.5.
31 “2022 power and utilities industry outlook” December 2021 https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-eri-power-utilities-outlook-2022.pdf
32 “Why 5G is the MVP of the healthcare tech revolution” August 18, 2021 https://www.verdict.co.uk/healthcare-robots-and-rad-realities-wont-happen-without-5g-infusion/
33 “The Future of 5G Adoption” May 24, 2021 https://www.jpmorgan.com/insights/research/future-of-5g-adoption
34 “How 5G will transform health care” December 3, 2021 https://www.hospitalhealth.com.au/content/technology/article/how-5g-will-transform-health-care-1389622827
35 “Qualcomm Unleashes a New Era of Autonomous Drone Capabilities with World’s First 5G and AI-Enabled Drone Platform” August 17, 2021 https://www.qualcomm.com/news/releases/2021/08/17/qualcomm-unleashes-new-era-autonomous-drone-capabilities-worlds-first-5g
36 “5G drones: everything you need to know” August 24, 2021 https://www.5gradar.com/news/5g-drones-take-to-the-skies
37 “2022 power and utilities industry outlook” December 2021 https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-eri-power-utilities-outlook-2022.pdf
38 “Global 5G Market Demand and Service Revenue Forecast Report 2021: There Will be 4.1 Billion 5G Mobile Subscriptions Worldwide At year-end 2026” October 13, 2021 https://www.globenewswire.com/news-release/2021/10/13/2313246/28124/en/Global-5G-Market-Demand-and-Service-Revenue-Forecast-Report-2021-There-Will-be-4-1-Billion-5G-Mobile-Subscriptions-Worldwide-At-year-end-2026.html