- 5G wireless network technology could eventually enable capabilities such as the internet of things, autonomous driving, sophisticated augmented-reality and virtual-reality experiences, and much more.
- Once 5G infrastructure is in place, companies further down the value chain should benefit: In particular, handset and other hardware makers, and ultimately providers of applications and software.
- The smartphone market could see an upgrade cycle as companies introduce 5G phones in 2020 but it will depend on 2 factors: 1) the robustness of the network carriers build and 2) the richness of the experiences that developers build on the network.
5G, the fifth generation of wireless network technology, is on the horizon. The promise of 5G is faster speeds, lower latency—that is, shorter delays in data transfer—higher connection capacity and broader coverage. In practical terms, these technological advances could eventually enable capabilities such as the internet of things, autonomous driving, sophisticated augmented-reality and virtual-reality experiences, and much more.
As 5G networks are being built around the world, the network infrastructure and equipment providers, as well as the semiconductor companies that supply them, should benefit most in the near term. Once the network reaches critical mass, companies further down the value chain will likely see more benefit: Service providers, handset and other hardware makers (and the semiconductor companies that supply to them), and ultimately providers of applications and software.
Full 5G coverage requires solving some technical issues, however. Due to limited access to lower-frequency spectrum, US carriers are relying more on millimeter-wave spectrum to build out their 5G networks than carriers in other countries. While millimeter waves provide the fastest speeds and connection capacities, their frequency range is so high-frequency that the waves can't travel very far or penetrate buildings or even trees. Consequently, carriers need to build out a denser network of nodes to catch 5G signals in metropolitan areas, and supplement this network with another, lower-frequency spectrum in rural areas. It remains to be seen what the true performance enhancement of these 5G networks will be.
One key fact that might impact the year ahead is that smartphones designed for 4G will not operate on 5G networks. This, coupled with the relatively advanced age of the average handset and expectations that mobile phone manufacturers will introduce 5G mobile phones in 2020, has led to speculation that there could soon be a long-awaited upgrade cycle in the smartphone market.
Aside from a smartphone upgrade cycle, I believe that a better internet connection will ultimately benefit internet companies the most. Mobile broadband was the key advancement provided by 4G networks, and it was mobile internet companies in social media, search, video streaming, and ride sharing that arguably reaped the greatest benefit from that technology. I think a similar dynamic will play out with 5G, possibly beginning in 2020, as developers build rich experiences for both existing and new internet companies to take advantage of what 5G has to offer.
I'm particularly watching companies with leadership in artificial intelligence (AI) and machine learning (ML). Given the extensive data they've collected and their ability to mine that data for useful insights, I believe these companies will have the most compelling opportunities to help industries unlock value by bringing AI and ML to the edge via 5G-connected devices. Think of factory floors with connected machines, or retail stores with real-time inventory management. This will play out over years rather than months, but the groundwork is being laid today.
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